Senior technical manager Boulger is calling on Chancellor Alistair Darling to temporarily take the axe to Stamp Duty on residential property; he says this move would cost the Government less than £2bn, but would “provide a lot of ‘bang for buck’ in the current environment”.
Boulger says: “There are two reasons behind the suggestion that this suspension should be for an unspecified period: firstly, prospective purchasers could not risk delaying too long on the basis that they had, say, a year, in which to buy without paying stamp duty and secondly, the Chancellor of the day would have discretion as to when to reinstate the tax and could therefore fine-tune this with an up-to-date view of the state of the market.
“This would also provide an ideal opportunity to make the tax fairer when it was re-introduced by avoiding the sudden jump in its cost at the threshold levels.”
John Charcol says revenue from stamp duty has collapsed in light of the approximate 60 per cent drop in property transactions and 25 per cent drop in prices. The latter causes revenue to fall more because it takes some properties out of the net completely and moves many from the 3 per cent tax band down to the 1 per cent band and others from the 4 to the 3 per cent rate.
As a result the brokerage estimates that the current run rate of revenue from stamp duty land tax is now well below £2bn, and so forgoing this would only cost about one sixth of the cost of the one-year VAT cut.
Boulger says: “Borrowing the extra required to finance 3 per cent or 4 per cent stamp duty was easy until the credit crunch, but can now be difficult with the much lower maximum loan to values in today’s market. Even if a borrower is able to extend their loan to cover the cost of stamp duty, being pushed into the next loan to value mortgage band will increase the cost of the whole loan, possibly substantially.”