UK taxman catching up to Middle East buyers?
According to some, news reports on property tax evasion by Middle Eastern property owners have just been over exaggerated but Kipp still believes that if strictly implemented, taxes will be a strong deterrent for future and current owners.
September 9, 2012 10:08 by M. Aldalou
If you drive a car I’ll tax the street, if you try to sit I’ll tax your seat, if you get too cold I’ll tax the heat, if you take a walk I’ll tax your feet. Taxman! – George Harrison.
People often refer to two very well known ‘entities’ to encapsulate the inevitable, Death and Taxes. And while medical science has improved so vastly that the average ‘life expectancy’ has soared beyond imagination over the past century, methods of evading taxes have also been created and frequently used.
In spite of the countless media reports and ‘biased propaganda’ suggesting that many Arab and Middle Eastern property owners are not paying taxes for their UK properties, Chris Myers, a partner at London-based law firm Forsters says that they don’t have much to be concerned about.
There are four fundamental categories of property tax in the United Kingdom and those include income tax, stamp duty, inheritance tax and capital gains tax. However, Middle Eastern buyers illegally evading taxes really doesn’t happen as often as people think, Myers said, quoted by Arabian Business.
“The press in the UK is fixated on people coming over to the UK to avoid taxes. It is a political football that has been kicked about by the press but in our experience there are very few people from the Middle East trying to avoid paying UK taxes,” he added.
Many Middle Eastern buyers claim to be falsely lured by UK-based real estate agents who allegedly say, in order to entice them, that their tax-free status does indeed stretch to England. However, as any law firm or property realtor will tell you, Her Majesty’s Revenue and Customs, the Kingdom’s governing tax body does dictate that property taxes, even on those owned by Middle Eastern residents, are payable.
Arab buyers, who make up a significant percentage of property investors in London, will be faced with 5 or 6 figures annually if they want to hold on to their assets, according to HMRC. The mixture of misleading information from greedy agents and the deep wealth of Arab nationals has proven to be a deadly combination as many Middle Eastern investors plunge into the deep end while unaware of their tax obligations.
Myers says that the back and forth between British and Middle Eastern media is nothing more than a political scare and despite the taxes, Arabs will not so easily be deterred from investing but Kipp isn’t so sure. Despite being described as ‘less fragile’ and more ‘resilient’, one can’t help but wonder how having to pay duty stamp, income tax, inheritance tax (in case of death) and mansion tax (depending on the value) will not prove to be a strong deterrent for Middle Eastern buyers.
Kipp reckons that if media reports on Middle Eastern tax evaders are nothing more than political scares then reports suggesting that Arab buyers won’t be affected by stricter tax implementations are nothing more than politically forced optimism because Kipp if didn’t know any better, we would say that if heavy taxes start burdening Arab investors then they will just flock elsewhere.
‘Should five percent appear too small, be thankful I don’t take it all’.