Brown Considering CGT On UK Property Sales

by Robert Lee, Tax-News.com, London

21 October 2003

The United Kingdom government has been considering whether to slap capital gains tax on the sale of a homeowner's principal property in a move that will bring Britain into line with mainland Europe as well as providing a further source of revenue for the Treasury.

"We know he [the chancellor] is eyeing up the housing market and we know he is looking especially closely at taxing people who make speculative short-term investments in the housing market," observed Patrick Cannon, the head of stamp duty at PricewaterhouseCoopers, in a Daily Telegraph report. "Not only would it raise money for the chancellor's flagging finances, but it would also help him calm the property market."

Under present rules, capital gains tax is levied at 40% if a homeowner sells a property that is not considered their principal private residence. This contrasts with countries such as Germany where capital gains tax is charged on all transactions deemed to be speculative, and in the housing market, this is taken to mean any property sold within ten years of purchase.

However, According to Mr Cannon, if the Chancellor does bite the bullet and introduce a similar measure, it is more likely to be along French lines, where the amount of capital gains paid falls the longer the property is held. Nevertheless, it would seem very unlikely the Chancellor would run with such a proposal this side of the general election.

Still, many tax experts think that Brown will be able to soften the blow to homeowners somewhat by exempting properties worth less than £500,000 from capital gains tax.

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