UK home buyers face snag in loans
HOME buyers considering a British property with a non-British lender could face a 25 per cent increase in payments, tax experts warn.
Peter Goodman, a partner with London-based Wilkins Kennedy, said an increasing number of overseas mortgages would fall into the withholding tax net.
'This is a time-bomb for the ill-advised,' he said.
Last year's Finance Act opened the doors for foreign banks to lend on properties in Britain.
Since April 6 last year, non-resident landlords with overseas loans have been allowed to claim interest relief against the rents received on commercially let property.
This has always been the case for domestic loans.
Leading lenders such as Hill Samuel, Midland Bank, Bank of Scotland and the Royal Bank of Scotland said since they were branches of British banks, their mortgages were not treated any differently to domestic mortgages.
Barry Lea, regional director, financial services and marketing at Hill Samuel, said: 'Our borrowers need have no concerns.' But Mr Goodman warned: 'Overseas lenders, in their agreements, tend to reserve their position so that whatever the tax regime in another jurisdiction, they receive the agreed rate of interest.' This means the borrower would have to pay for any unforeseen tax.
British withholding tax legislation is notoriously complex and open to conflicting interpretations.