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'Value added' tax for homes worth more than £2m
5:03pm Thursday 16th February 2012 in Advice
The highly controversial levy, which will see a tax of one per cent of the value of a home over £2m, could be introduced in the Chancellor’s Budget next month after persistent lobbying from Business Secretary Vince Cable.
Harry St John (pictured), head of agency at Smiths Gore in Cassington, said: “It is not a concept that can work nationally and it is full of anomalies – what happens if property values drop?
“Would an owner be rebated for the tax paid? How often would valuations be undertaken and who would do this? What if improvements made by the owner with income on which he or she has already paid tax, lift their property over the £2m threshold? Isn’t that just a bit unfair?
“What about leasehold properties, or alternative ownership structures? Nick Clegg and Vince Cable are looking at the number of £2m plus properties in London and the Home Counties and thinking ‘there’s a tax goldmine’, but it’s just not that simple.”
Mike Harrison, partner at accountants Saffery Champness, added: “There will have to be clear distinctions between high-value residential properties in cities and towns and, for example, the small country estate where the house itself may be of relatively low value in the context of the overall property.
“That property will invariably be run as part of a business rather than simply as a private residence. There must be clear rules with regard to how the threshold is set.
“We are also in danger of alienating overseas investment by continuing with this trend of taxing the very wealthy for a limited return. The £30,000 levy on non-doms launched in 2008 (and soon to become £50,000 for some) saw an estimated 16,000 of them quit the UK in year 2010/2011 with many taking their business and their bank accounts with them.
“Some of those who did not go then may just see an additional tax on their property as a further disincentive to stay here, or to consider buying here in the first place.
“Mansion Tax is a distraction. A far bigger issue is that of funds and property held offshore and not correctly reported and we expect this to be an issue of substance that will be a target for the Chancellor in his March Budget.”
Contact: Harry St John, Smiths Gore Oxford, 01865 733304 Web: www.smithsgore.co.uk