51: What ‘Brexit’ could mean for international owners of UK property
With the referendum being held tomorrow (Thursday 23 June) to decide whether the United Kingdom should remain in or leave the European Union (EU), we highlight the possible implications for international owners of UK residential property.
If the UK votes to remain in the EU it is likely that the current status quo over UK property ownership will continue, with tax rhetoric and uncertainty continuing to stifle the prime central London property market.
We continue to wait for the Government’s much anticipated consultation document on its proposal that all UK residential property whether held directly (i.e. personally) or indirectly (e.g. via offshore companies) by foreign domiciled persons and excluded property trusts is brought within the scope of inheritance tax.
The Prime Minster, David Cameron, has also confirmed the Government’s intention to press ahead with the creation of a public register requiring foreign companies who wish to buy land and property in England and Wales to provide information on their beneficial ownership. At the Anti-Corruption Summit which took place in London last month, Mr Cameron also confirmed that this requirement will also extend to existing owners of land and property in England and Wales.
If the UK votes to exit the EU (often shortened to ‘Brexit’) economists believe that in the immediate aftermath the value of sterling would weaken considerably. This instability may dent the UK’s reputation as a safe haven in an otherwise uncertain global market and prompt foreign individuals who own UK residential property to sell and look to invest elsewhere. For others, a weakened sterling may well offer an opportunity to enter the London property market, which for many, until now, had become too expensive.
In our publication ‘Globally Speaking: Putting HMRC’s Approach to Taxation of Foreign Owners of UK Property into Context‘ we noted that property in London is a global asset, subject to global political and fiscal factors and trends, distinct from the national market which is more affected by domestic factors and trends. The possible implications of “Brexit” may serve to further highlight this, and demonstrate that despite the economic uncertainty that is likely to result from a vote to leave the EU, and in spite of the targeted tax measures the Government has introduced aimed chiefly at foreign owners of UK property, the appetite for investment in London residential property remains strong.
22 June 2016