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Today’s changes to the stamp duty set-up have been greeted with caution from within the tax profession.
In his Budget speech to Parliament, the Chancellor announced a new 5% rate of stamp duty for properties above £1 million, to fund an increase in the stamp-free band from £125,000 to £250,000, which will last for two years for first-time buyers.
Budget documentation confirms this will apply only to residential property and that the new 5% rate will come into force in 2011 – when house-buyers will be forced to pay a minimum of an extra £10,000 on their property, claimed Chris Maddock of Vantis Group.
The measure is ‘another hit to the pockets of lots of businesses, and many of those already going to be impacted by the 50% income tax rate,’ he said.
The Chartered Institute of Taxation’s tax policy director, John Whiting, raised a concern about the difficulties of establishing what constitutes a first-time buyer.
‘The [increase in the no-duty threshold] sounds good on the surface but runs the risk of there being complex definitions of first-time buyer that cause anomalies and difficulties in practice.
‘It has the hallmarks of a provision that has risks in it for the public and their professional advisers, who will no doubt have to manage the uncertainties in the scheme,’ said Mr Whiting.
Patrick Stevens, a partner at Ernst & Young, comments said the new stamp duty regime is ‘likely to encourage sales before the implementation date, giving a boost to the top end of the housing market and potentially providing a welcome short term boost to exchequer revenues’.
Noting that the change retains the ‘slab’ system, Mr Stevens said, ‘The regime distorts sales at £250,000, £500,000 and now at £1 million. There appears little logic for increasing stamp duty by £10,000 for a £1 increase in price from £999,999.’
