BLOG: It’s time to clear up the stamp duty mess
With this year’s Autumn Statement, Chancellor George Osbourne has openly admitted that the Government will benefit from strengthening tax avoidance measures, raking in around £9bn over the next five years.
There has been so much in the press recently regarding tax avoidance that something of a ‘fear factor’ has developed, with HMRC playing the lead role of chief ‘scaremonger’. The announcements that were made within the Autumn Statement will merely strengthen this feeling of ‘fear’, with the Government taking centre stage for the time being.
We have reached a worrying point where people would prefer to pay too much tax rather than risk being perceived to be paying too little. Effectively, what has happened is that HMRC has used this to its advantage and is now reaping the benefits – and will continue to do so for years to come, it would seem.
When it comes to Stamp Duty Land Tax (SDLT), it is important to stress seeking tax advice is not the same as tax avoidance but, put quite simply, a matter of paying the right amount of tax for the property that you are purchasing, how it is being bought and what type of property it is. Expert advice is needed in this minefield, which even HMRC officials often struggle to understand and clarify.
As a nation obsessed by home ownership, we are penalised by paying the highest amount of property taxes in the developed world.
By not implementing fundamental changes to SDLT, the Chancellor has simply taken the easy option and attempted to smoke screen the clear need to change a tax that punishes hard working professionals by making it look like an issue just for the elite.
It has been 10 years since SDLT, in its current form, replaced Stamp Duty. Previously, it was simply an admin charge; now, it is a revenue generating tax.
This changed emphasis has a major bearing on the economic viability of a property purchase, thereby impacting the still-fragile housing market.
One positive that has at least emerged from the Autumn Statement is that more and more people are quickly realising that something needs to be done with regard to SDLT.
Despite sales of property being almost 50% lower than in the boom of 2007/8, HMRC stands to make the same in stamp duty – £6.7 billion – this year, as it did then. In my opinion, that is almost criminal.
It is becoming increasingly more apparent that HMRC and the Government need to decide how they move SDLT forward; making it clearer for the tax payer and fairer at all levels of property purchases. A simpler system needs to be implemented and soon, before it causes even greater damage to the housing industry.
Hopefully, next year will be the year that the industry fights back and makes things fairer for everyone.
David Hannah is principal consultant at Cornerstone Tax Advisors