March 13th, 2013
This week a motion presented to the House of Commons by Labour MP’s, to introduce a mansion tax on high value UK properties, was defeated after voting concluded. The mooted plan to introduce a new levy on properties worth more than £2m was brought to the Commons by Shadow Treasury minister Chris Leslie, but the final count stated 304 votes against, to 241 in favour of the move.
The proposals began to take shape at the end of 2012, when aspects of the current rules on high end properties were adjusted by the Government. The reasoning for these changes was to prevent foreign investors purchasing homes in the UK under tax loop holes that allowed a lower than normal rate of tax being paid, if the property was purchased via a company.
The revised plans contained a clear outline that the tax would not be levied if the property holder could prove that the buildings were used for solely business purposes, which includes those owned by property investors and landlords. However, the new motion was a proposal to widen the scope of the tax, to incorporate previously protected properties.
It was widely reported last month that Vince Cable had revealed tentative signs that the Liberal Democrats were considering putting weight behind any proposed plans the Labour party had for this particular motion, although comments made at the time suggested that Cable felt members of his own party may waiver in complete support once any motion was tabled.
Cable said: “If it's purely a statement of support to the principle of the mansion tax, I'm sure my colleagues would want to support it. But very often in these opposition days they can't resist the temptation to make party political point scoring and dragging other issues in like the 10p rate. If that happens I'm sure we will not. It's up to them to be statesmanlike and sensible in how they approach it.”
And it was perhaps not surprising to hear that during an interview given to BBC Radio 4 on Monday, Cable clearly stated that the Lib Dem’s would not be backing the Labour plans. Rather less resounding support came in the form of a tabled amendment in recognition of his party’s support for a form of mansion tax, but not a direct vote in favour of the motion.
With voting concluded, it was interesting to note that Chris Leslie appeared to suggest that his party would now have to consider whether it would carry forward the proposals into the Labour manifesto for the next general election. Instead, the suggestion appears to be that the opposition party will wait to see what “other horrors” are raised during the Budget and the spending review in June, before setting out a definitive position on the matter.
The Labour MP, Karen Buck, had pointed out to the Commons that 60 per cent of these higher end properties were purchased by foreign investors, and she emphasised the risks of not defending those citizens with a high value of assets, but a lack of income. In support of his party member’s fears, Leslie proposed a mansion tax with certain provisions made for more vulnerable property owners would be a sensible approach.
Backing this point, Treasury minister David Gauke echoed the concerns, but also elected to note that it was the incumbent Governments move to increase the stamp duty levy’s on properties worth more than £2m from 5 per cent to 7 per cent, and that they had already implemented a 15 per cent duty for any property in this bracket that was purchased via a corporate entity.
The Prime Minister and Chancellor harkened back to comments made by David Cameron in October last year, when he instead proposed alternative methods to tax higher earners within the UK. George Osborne also backed this decision in his Autumn Statement at the end of 2012, when he told the Commons that any such tax would be “intrusive”, and ultimately an “expensive” process to see manage. He also stated that any such proposal would offer temptation to future governments to widen the net for the levy, in order to capture more properties under the revised bracket.
Article by: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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