U.K. tax rise unlikely to deter HK buyers

New tax measures unveiled in the budget announced by Chancellor of the Exchequer George Osborne last month mean Hong Kong buyers of multimillion-pound homes in Britain will now pay more tax.

As part of a package of measures to tax wealthy people more heavily, the government introduced a higher rate of stamp duty for homes valued at more than ?2 million (HK$24.5 million), raising it from 5 per cent to 7 per cent. This means, that from March 22, buyers have been paying an extra GBP20,000 in stamp duty on every GBP1 million they spend on homes sold for more than GBP2 million.

Hong Kong investors who buy British homes using companies based in tax havens like the Isle of Man will be particularly badly hit, because they must pay stamp duty on multimillion-pound homes at 15 per cent from now on. Until the budget, some buyers had used these companies as a way to avoid paying most of the levy, some paying stamp duty of as little as 0.5 per cent.

To dissuade overseas buyers from investing via tax haven companies in future, the government will, from April next year, charge such buyers capital gains tax when they sell property.

In addition, it will consult on introducing an annual levy, equivalent to 15 per cent of the market value, on homes owned by these tax avoidance vehicles.

The government will also consult on introducing a 'mansion tax', advocated by the Liberal Democrats, where an annual charge is levied on multimillion-pound homes. However, most Conservatives oppose this tax, so it is unlikely to be introduced or only in watered down form.