Press Article
METRO - 2 February, 2012
Stamp duty
By Jo Eccles
There has been much controversy over the last week about different types of property tax. Firstly - stamp duty land tax (SDLT), a tax paid by buyers when they purchase a property. All properties bought for more than £125,000 are liable for stamp duty and, depending on the value of the property, this varies between 1% - 5% of the purchase price as a one off payment.
However, buyers can sometimes avoid paying the full stamp duty amount by buying properties in the name of offshore trusts - and many wealthy buyers seem to be doing so to avoid paying it. According to recent reports, more than £100 billion of central London property is held in offshore trusts, out of the reach of the tax man. As well as missed out stamp duty revenue, the 40% inheritance tax can also be avoided through this means. Avoidance in paying stamp duty is estimated to cost the Treasury (and tax payers) £500 million per year. It is anticipated that the Government will be announcing measures to clamp down on SLDT avoidance in the March budget. I think it’s completely fair for the government to pursue those who aren’t paying tax when they should be. The stamp duty loophole needs to be closed - why the government hasn’t acted until now, despite it being aware of the loophole for years, is another matter.
What isn’t fair in my opinion, is taxing people further who have already contributed significantly to the UK’s tax revenue over the years, which brings me on to the ‘Mansion Tax’ that the Liberal Democrats are keen to impose. They propose to tax those who own properties worth more than £2 million. Whilst a lot of the nation can only dream of living in a home worth £2 million, it doesn’t make economic sense to punish those who do, and have often worked incredibly hard to do so. Mansion tax has some fundamental flaws, penalising particularly those who own an asset but aren’t still working, e.g. pensioners who may have lived in the property all their lives and the value of their home has risen above the threshold during this time, or an entrepreneur who has sold a company (and paid tax on it) and is no longer working. In each case, their wealth will dwindle as they are having to pay out a substantial amount of tax each year and may need to eventually sell up, despite having already paid tax on the money they have earned to buy the property in the first place.
The tax also discriminates against those who are storing wealth in one property, whereas someone owning lots of houses worth £1.9m each will escape the payment - this doesn’t make sense at all. There are too many anomalies with this proposed tax, and I am sure there are fairer ways to raise revenue! In any case, before the government imposes new taxes on the nation, they should clamp down on those avoiding the existing tax rules.