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Britain may tax foreign property investors -deputy PM

Peter Griffiths
Monday, 18 Nov 2013 | 9:49 AM ET

* Britain reviewing tax on foreign property investors

* Deputy PM Clegg says they "must pay fair share"

* Overseas buyers fuel London property boom

LONDON, Nov 18 (Reuters) - Britain may impose new taxes on foreign property investors in response to soaring house prices in London, Deputy Prime Minister Nick Clegg said on Monday.

Demand from foreign buyers, especially from Asia and the euro zone, has stoked concerns of a property bubble and worries that many Britons are being priced out of the market.

Clegg said the government was reviewing the matter before finance minister George Osborne's update to parliament on his economic plans on Dec. 5, but said no decision had been taken.

"We certainly need to make sure that people who invest very large amounts of money into property in central London locations...pay their fair share of tax in those transactions," Clegg told a news conference, without giving any details.

"That is why we are looking at options like a differential application of capital gains tax to those kind of transactions," he said.

Britons pay capital gains tax - typically at 28 percent - on any profit from selling property that is not considered their primary residence. Foreign property investors are exempt.

Clegg said an influx of foreign money had left parts of the London property market "divorced from and dislocated from the rest of the economy".

However, he said the government did not want to undermine Britain's status as an open economy and said it would be bad for the country if the government "pulled up the drawbridge".

With an election in 18 months, rising house prices are a double-edged sword for coalition partners Clegg and Prime Minister David Cameron.

Higher prices can make homeowners feel better off and help the drive the economy, but they are less popular with the many people struggling to buy their first home.

The issue also feeds into a wider debate in Britain about the cost of living and whether the government is doing enough to help people who feel left behind by the economic recovery.

Sky News, citing unnamed Treasury officials, had reported on Oct. 31 that Britain was considering making foreign property investors pay capital gains tax.