WEALTHY foreigners will avoid paying Alistair Darling’s latest stamp duty hike on properties worth over £1m at an opportunity cost of tens of millions to the Treasury’s coffers, it emerged yesterday.
Special Purpose Vehicles (SPVs), which are set up offshore for the purpose of holding property, own a large amount of the UK’s high-end estates. Buyers can purchase property by paying for shares in these companies, enabling them to avoid the UK real estate market and the chancellor’s new five per cent stamp duty.
It is unknown exactly how many UK properties are owned by SPVs, but it was estimated yesterday that it could be as much as a third in London’s wealthiest districts, in particular Hampstead, Kensington and Knightsbridge.
“A large proportion of foreign assets are owned in this way,” said Andrew Teacher, spokesman for the British Property Federation.
British homeowners said they felt aggrieved about a tax system that continually favours their offshore compatriots and wealthy foreigners.
A Treasury spokesman admitted SPVs are one of the techniques used to avoid stamp duty and that the “Budget had penalised wealthier people in the UK.”
However, the Treasury spokesman said that despite being aware of the problem, it was difficult to crackdown on it.
“We don’t support deliberate tax avoidance,” the Treasury spokesman told City A.M.
“But if it’s within the legal confines, there’s not much you can do to stop it.”
SPVs are mainly located in the British Virgin Islands, Panama and the Isle of Man and require a £10,000 fee upfront to join.
The government is planning to use the increase in stamp duty it receives from the hike to scrap tax for first-time homebuyers purchasing houses up to £250,000.