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December 12, 2012

Wayne Coleman: Draft Finance Bill Will Hit London’s Prime Property Market

By Spear's

Freddy Barker speaks to leading real estate financier Wayne Coleman about how yesterday’s draft Finance Bill will affect London’s prime property market.

YESTERDAY’S DRAFT FINANCE Bill unveiled a series of alarming measures for UHNWs, most especially the annual levy of £140,000 and 28% Capital Gains Tax rate on corporate vehicles used to buy £20m-plus homes.

Collectively, these changes force UHNWs to choose between a mansion tax and a privacy intrusion — if they decide to avoid the charges by purchasing property in their own name rather than through a corporate vehicle, their ownership of the property will thereby be made public. This is a startling development, which many believe will threaten London’s private client community.

Wayne Coleman (pictured above left), a leading real estate financier, predicts, however, that, ‘UHNWs are unlikely to sweat the charge as they will have made all their tax savings through complex international structuring over a number of years and so being told to pay slightly more means little when compared to the bonus of getting the right home or avoiding extreme tax regimes elsewhere.

Read more: Withers: Autumn Statement has mansion tax by another name

‘But,’ he continues, ‘the implications are greater for the £2m – 5m bracket. That segment has always seen a disproportion between house prices and buyers’ net worth as, for example, £3m houses are bought by people worth £5m, in stark contrast to the super-prime market where £15m houses are typically acquired by UHNWs valued above £100m.

‘Therefore the government’s draft legislation paper has exacerbated the implications in this price bracket as many will have to purchase in their own name in order to avoid the taxes imposed on non-natural persons, whereas the upper tier will continue to view these taxes as peripheral.’

London’s private client community will certainly be hoping Coleman is right, and that headlines such as ‘Roman Abramovich purchases a £90m Kensington Palace Gardens mansion’ and ‘Rinat Akhmetov acquires £136m One Hyde Park apartment,’ continue.
 
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