Chancellor George Osborne has confirmed he will close a stamp duty loophole in Wednesday’s Budget, promising heavy fines for non-compliance.
Speaking on The Andrew Show, Osborne said the Government will “come down like a ton of bricks” on the practice. The Treasury will ensure any property that is lived in, either by the owner or by a tenant, is subject to stamp duty. Those who avoid the tax after measures the Chancellor will announce at the Budget will face “punitive charges”.
He said: “We are going to deal with this avoidance of stamp duty and you know people have had their warning. They have got to pay stamp duty on the homes they live in and we are going to deal with that in a very, very aggressive way.
“Rich people, often foreigners who come to this country but also some people here in Britain, who put homes into companies to avoid stamp duty. That is completely unacceptable. We are going to come down on that practice like a ton of bricks”.
Stamp duty starts at 1 per cent on properties over £125,000, rising to 5 per cent on homes over £1m but it can currently be avoided by buying the property through an offshore company. In October, HMRC said it was chasing 1,200 people for £35m in lost revenues because of avoidance of the levy.
The Sunday Times reports the Government is also likely to close down schemes used to avoid stamp duty on lower value properties. The paper reports that accountants believe such schemes have been promoted to up to half of all homebuyers in the £300,000 to £1m range over the last few months.
The schemes exploit rules around “sub scale relief” which were put in place to stop developers paying stamp duty twice. Once the home is bought it is transferred to a trust at a value below the £125,000 stamp duty threshold. The Sunday Times says the schemes are likely to be banned from midnight March 21 and HM Revenue & Customs is expected to pursue past purchases for penalties.