Non doms and housing

It is reported that the non domiciled tax rules have fuelled London property prices. We find it hard to read this as being anything more than another ill comment, and more than a little curious given that the estate agency responsible for the report has a finance arm responsible for flogging the UK tax code far and wide as a sales tool for gaining the attention of prospective wealthy foreign clients.

It seems that the non domicile issue has now become code for the resurgence of the traditional British loathing and distrust of foreigners; a trait which, as a nation, we could have afforded in a bygone era when we either created or simply helped ourselves to the world's economic resources, but which must now surely run the risk of backfiring with serious consequences.

Firstly, domicile status has only secondary relevance in the chargeable gains code, which is founded primarily on the residence and ordinary residence status of the individual . Many of the foreign investors into the London market are not resident in the UK and, in our experience, a good number have never once set foot in the UK in their entire lifetimes. The domicile of these individuals has no relevance whatsoever to their UK tax exposure, or lack of it, on profits made on UK property investments.

Secondly, like it or not, the enjoyment of profits on residential housing is favoured by the UK tax system, and the system applies to all. The reliefs on offer may have little absolute monetary value to the majority, but is a bit steep to round on wealthy foreigners for being able to enjoy larger tax free profits. After all, it is not their government responsible for the law and, moreover, human nature suggests that others would be far less vocal if it was not for that one small but ever so important fact; they are not possessed of sufficient means to purchase a £10M Belgravia townhouse.

Thirdly, it is well understood that SDLT is mitigated by many wealthy foreigners and British alike, but their ability to mitigate is derived mainly from their wealth, which affords them the possibility of lawfully arranging their investment transactions in an efficient manner, and arguably more lawfully than the supposed many who continue still to indulge in the over inflated furniture sale wheeze.

We would posit that the popularity of the London residential property market for foreign investors has very little to do with tax breaks, but more simply because the London property market is seen as a good investment in a relatively safe harbuor, both economically and politically. We are in a phase where, in London at least, the UK is the place to be for internationally mobile money and talent. That money and its owners have, one way or another, been flocking into the UK not only with the positive encouragement of the UK government but, also, with a hefty push by the USA which has overestimated its own importance in the world markets in recent years.

Perhaps, we should be more mindful of the consequences which will ensue when, inevitably and for whatever reason, London loses its popularity in the world arena. In the meantime, we should also consider what it says about us as a nation when we see fit to belly ache about foreigners receiving the benefit of laws which are made by our government and in our name.