The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

Fine Words, Flawed Idea?

George Osborne proposes to overrule international double tax agreements to ensure profits from trading in UK property by non-residents swell the Treasury's coffers. Robert Maas, tax consultant at London accountants CBW, questions whether this smart move w

In every Budget I've given, action against tax avoidance and evasion has contributed to the repair of our public finances. And this Budget is no different. In the Budget book, we set out in detail the action we will take to… ensure that UK tax is paid on UK property development." Fine words by George Osborne in his Budget speech.

However, had he not been a politician he may have put things rather differently: "Over the years, we have entered into a great many treaties with other countries. The terms of these treaties are negotiated with the overseas government to provide a balance of benefits to both parties. I am not a historian. I don't care about integrity. If past governments have negotiated deals that I don't like, I will tear them up. After all this is Great Britain. Less powerful foreigners can't reasonably expect us to keep our word when it no longer suits us. Of course, most treaties contain a termination provision, but I don't want to tear up our treaties. I simply want to ignore the bits that I do not like." This would have better reflected what George Osborne intends to do.

Devil in the detail
To be fair, we do not yet know the details - and are probably not going to know much more until after the EU Referendum. However, we do know that his intention is that all profits from trading in UK property by non-residents will be brought within the scope of UK tax. Non-residents include overseas structures set up by UK residents. Of course, it makes sense to tax these profits. The UK is entitled to tax profits arising in the UK and profits from UK land clearly arise here.

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