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Stamping on Stamp Duty? - Stewart Andersen

Stamping on Stamp Duty?

Now that we are in December, we’ve also arrived at the season for pantomimes. All over the country actors, both professional and amateur, will be striding onto the stage and entertaining the public with their Aladdins, Widow Twankeys and Dick Whittingtons. Stewart Andersen heads for London where the streets are paved with gold (well, the Palace of Westminster, anyway).

In London that long-running farce, ‘MP’s Expenses’ will still be ongoing at the House of Commons through to the New Year.

There’ll still be a small chorus of Members from all shades of opinion and sides of the House exclaiming, “But we thought we were following the rules,” the Public (The Audience) replying with “Oh no you didn’t” and the Members chiming in again with “Oh yes we did!”

Certainly changes are afoot, with the Stage Manager (sorry, the Commons Speaker) insisting on reform for the holidays that MPs are allowed (currently the Summer Recess is 82 days - only slightly longer than the break that most of their constituents get) and this means they’ll be glad of a holiday at Christmas given that they have to face a General Election in 2010.

And, of course, there’ll be a number of MPs at the General Election who’ll be choosing to spend ‘more time with their families’ given that they won’t be allowed quite so much freedom in their choice of second homes.

Contentious and unpopular

In the meantime, MPs will be facing the knotty problem of Stamp Duty. So contentious and unpopular is Stamp Duty that a group has been formed called the ‘1808 Coalition’ to urge the government to abolish a tax that hinders many people from purchasing a home.

The ‘1808 Coalition’ partners are:

• Association of Mortgage Intermediaries (AMI)
• Association of Residential Lettings Agents (ARLA)
• Building Societies Association (BSA)
• Council of Mortgage Lenders (CML)
• Home Builders Federation (HBF)
• National Association of Estate Agents (NAEA)
• National Landlords Association (NLA)

It’s worth considering the fact that a tax that is so swingeing that it restricts the buying public from purchasing a house or apartment is stifling the recovery of the property industry. The negative impact of Stamp Duty in the current financial climate is that it places a massive burden on people who are least able to cope with finding a large sum of money demanded by government.

Neil Young, CEO of property portfolio managers, Young Group, points out: “Stamp Duty is a barrier to entry for many first time buyers and is also prohibitive for those looking for a step up the property ladder. In addition, it disproportionately penalises those investing in buy-to-let portfolios, who have to pay Stamp Duty on the bulk price when individual buy-to-let investors pay a lower rate on the individual unit price.”

The property market is one of the main engines that drives the UK economy and to stifle it in such a way is short-sighted. The revenue the government receives from the property industry in general and Stamp Duty in particular should not be sniffed at by short-sighted politicians.

Peter Bolton King, Chief Executive, National Association of Estate Agents says, “On the face of it the Treasury has done very well out of Stamp Duty. By not raising the threshold in line with property prices, the tax yield from residential Stamp Duty has grown ten-fold since 1996/97. Between 1997 and 2008 receipts from Stamp Duty grew from £675 million per annum to £6.68 billion.

“In a boom, house prices moving into the higher boundaries results in substantially higher revenue. It also means that in a housing slump this decreases rapidly. The Government’s own figures show that Stamp Duty will bring in an estimated £5.5bn less than planned in 2008/9 and a projected £10.2bn less than planned in 2009/10. The Government's own figures show that Stamp Duty will bring in an estimated £5.5bn less than planned in 2008/9 and a projected £10.2bn less than planned in 2009/10.”

This archaic tax has failed to evolve and is an unwelcome burden for anyone seeking to buy a new home. As lenders demand even greater deposits, buyers are going to struggle to stump up the huge capital outlay that Stamp Duty demands.

However, it will be curtain down on this parliament by the middle of next year. That will give a new government the chance to act sensibly and to reform the Stamp Duty system in a way that is both productive and fair.

Stewart Andersen

Stewart has worked on a variety of magazines for more than 20 years as a journalist and editor, usually specialising on property and travel, both in the UK and overseas. His first book ‘Wild Thyme in Ibiza’ was published recently and this year he launched Property & Travel with Stewart Andersen

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