Tuesday 17 October 2017

How our rules for house-buyers are different

Donal O'Donovan

Donal O'Donovan

The UK is belatedly moving to reform its tax code so that overseas house buyers pay the same tax as British citizens when they buy and sell property.

Under the current regime, a housebuyer resident in China, Russia or indeed in Ireland does not pay UK tax on the profits made by buying and selling a British house.

In contrast, British residents are liable to pay up to 28pc in capital gains tax on the profits made on investment property.

The anomaly is unfair and also a dangerous incitement to property speculation. The breaks helped attract billions of pounds worth of footloose cash to the country's housing market, especially at the height of the euro crisis. That has helped fuel rampant property rises in London in particular.

On some streets in the wealthiest parts of the capital, the majority of houses are owned by billionaires living abroad.

That kind of demand has helped drive up prices – hurting middle and lower income families.

Could it happen here?

There is some evidence that international buyers are moving into the residential investment market here – in some cases, presumably because they too are priced out of London. But the rules are different here. In Ireland, overseas buyers of residential property are already subject to full capital gains tax which means they must pay 33pc of any profits made in tax.

There are tax breaks currently in place here to encourage investment in commercial property. While these may be distorting the market, the breaks apply equally to Irish and overseas investors.

Irish Independent

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