TaxCorporate Tax£1bn stamp duty windfall beckons

£1bn stamp duty windfall beckons

With just over two weeks to go until stamp duty land tax comes into force, the Inland Revenue is still making changes to 'fundamental' sections of the legislation.

On 1 December, all property transactions will be subject to self assessment-style stamp duty in a move that the Revenue has introduced to clamp down on tax avoidance. Early estimates suggest it will earn the exchequer more than £1bn in extra revenues a year.

Kevin Griffin, director in charge of the stamp tax group at Ernst & Young, said that, while he understood the principle of clamping down on avoidance, ‘the legislation was not well drafted’. He added: ‘The Revenue definitely tried to rush this through, probably under political pressure.’

Last week, amendments were made to the official legislation in addition to the publication of two forms to add to the existing, and far more complex, eight-page main return, SDLT1.

The complex nature of the latter, said Griffin, will add to the confusion surrounding the tax, while leading to higher rates charged by lawyers and accountants.

Buyers who purchase property on, or after, 1 December must complete a self assessment form and pay the amount of SDLT within 30 days. Penalties will be imposed on late filers and late payers. Griffin said: ‘The Revenue wants to reduce the 30-day period of paying, perhaps to five days.’

Chas Roy-Chowdhury, head of tax at ACCA, said the new regime would put taxpayers at a much greater risk. ‘The Revenue intends to carry out 20,000 audits, 3% of which will be on domestic properties,’ he said. ‘Taxpayers need to be aware of the danger of “smart moves” that might bring them under thresholds.’

The rates of SDLT depend on the value of the property, with 4% charged at £501,000 and above, 3% between £250,001 and £500,000, and 1% between £150,001 and £250,000 – if non-residential – and between £60,001 and £250,000 if residential. There is no charge below these two thresholds.

This may well change, however, as stamp duty is believed to be a prime target for tax increases, with rumours of a 5% rate on property above a new £750,000 threshold.

– For more: www.inlandrevenue.gov.uk/so.

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