South of FranceThe purpose of taxation is normally seen in the context of raising revenue for the Exchequer and in some circumstances changing ‘behaviour’ and social outcomes. How and on whom it is levied varies given the political hue of any given Government. Post war consensus though has generally ensured that the wealthier sections of society pay more than those less well off.
Provided this taxation has not been too excessive, as for example during the 1970’s, and wealth creation not hampered, this status quo has been generally accepted as fair and principled.
The proponents of the Laffer curve (let’s get technical here!) believe there comes a point of tax optimisation and it is in this context we question George Osborne’s recent Stamp Duty changes.
Evidence from the prime central London market demonstrates that the overall tax take for the Chancellor has declined. It is, after all a transactional tax, therefore many fewer transactions equates to lower revenues. The recent additional 3% for second or additional homes only adds insult to recent injury.
Why, you may ask, should this concern us here in France?
Well, in a direct sense, it does not. That said, if I was considering a second home purchase in, let’s say, Devon or Cornwall, Rock perhaps, with a notional budget of £2.5m, I would now be seriously dissuaded from doing so. To put it in context, let’s look at the comparative costs of buying at that budget between the UK and France.
UK costs:
Total stamp duty costs would be £288,750. Solicitors’ costs would be approximately £6000 on a purchase of this value. This brings the total to just shy of £300,000 for a purchase of £2.5m.
France costs:
Total transactional costs that include Notarial fees, Stamp Duty and Land Registry charges would be approximately 7.5% of the agreed price. A total of £187,500
Neither figure can be described as cheap however the additional £100,000+ in the UK makes a significant material difference.
A second home in the UK may have seemed like the sensible option for many. The perception of the ‘tax problem’ in France and the omnipresent ‘Hollande’ factor have undoubtedly put some buyers off in recent years. They may well have considered a chalet or apartment in the Alps or a farmhouse in Provence only to be scared off by inaccurate reporting on the tax situation in France. The fact is that for non-resident buyers the tax position is benign.
We accept completely that if people have an overriding wish to be in the West Country then they will commit themselves to that course of action and accept the costs. For others who may have pondered an ‘either or’ situation, the possibilities in France have become, thanks to George Osborne, financially much more attractive.
The sign in France with ‘BIENVENUE’ written on it has just become a little more prominent.