The “mansion tax” proposal refuses to die in UK politics,
despite it having been mooted as a policy proposal several times, only to meet
with strong opposition in some quarters. The latest expected proposal for a “super
mansion tax”, by the Liberal Democrat Party – partners in the UK coalition government
– has been sharply criticised by accountancy firm Saffery Champness.

According to media reports, the LibDems want to impose a 1
per cent annual levy on homes worth more than £2 million.

Ronnie Ludwig, partner in the private wealth group at
Saffery Champness, said there are three problems with such a tax.

“A mansion tax, like inheritance tax, is potentially an
insidious tax. Once the threshold is set it is unlikely to keep up with the
true rate of appreciation in value of the properties concerned. At best the
base for becoming liable will be increased by general inflation, at worst it
will be frozen. The end result is that, over time, more and more properties
will fall within the scope of the tax as property values recover,” he said in a
statement.

“There will be serious regional differences. Properties in
the South East, especially London where values
are already very high, are likely to be hit disproportionately hard compared to
comparable properties in other parts of the UK,” Ludwig continued.

“This could also act as a further deterrent to the UK attracting wealthy foreign entrepreneurs to
come to the UK.
These are the very people we need to attract here to start new businesses and
create jobs, especially as we have a very attractive corporate tax regime
compared to many countries. In that context the proposals seem
counter-intuitive and unhelpful to the UK economy generally,” he added.

Taxes on high-earners and owners of large properties remain sensitive
issues in UK politics; the government has lowered the top rate of income tax to
45 per cent from 50 per cent; it operates investor and entrepreneur visa
programmes for wealthy foreigners entering the UK, and London is seen – despite
tax changes – as a relatively welcoming place for high net worth residents. But
as luxury property values have surged in recent years – albeit with signs of
deceleration – it has led to calls for taxes on “mansion properties”.