This week's opinion: 22 August 2019

Private residences have always featured prominently in the tax system. In the past few weeks we have seen cases on whether short-term occupation qualifies for only or main residence relief (Fitzjohn (TC7291)) and on how the stamp duty land tax mixed used rule applies to grounds associated with a house (Hyman (TC7271)). The recent Office of Tax Simplification report on inheritance tax has pointed out the near incomprehensibility of the downsizing rules for the residence nil rate band and we are in the middle of a consultation on legislative changes to only or main residence relief. The new Chancellor has speculated about shifting the burden of SDLT, although he appears already to be backtracking on this. There is plenty more I could comment on: this is always going to be an area of lively debate.

How should the tax system deal with private residences? At one extreme, they could be treated in the same way as any other asset with no special reliefs; at the other, they could be exempted from all taxes. At the moment we have a hodgepodge of rules built up haphazardly. Why, for example, is only or main residence relief dependent on the area of the property but the residential nil rate band is calculated by reference to value?

Perhaps it is time for a wide-ranging review of the taxation of private residences. This might be a ‘courageous decision’ in Yes Minster terms because of the way the press might spin hard luck stories from those who lost out, but that shouldn’t be a reason not to look at this. A generation ago tax relief for mortgage interest was such an ingrained part of the tax system that it was thought to be inviolate. But it did go and no serious commentator has sought its reintroduction. Radical change is possible.

If you do one thing...

HMRC has published guidance on the new buildings and structures allowance (tinyurl.com/hmrcsbaaug). It brought out some points that I had not appreciated before and is well worth reading.