Andy Valvona, director, Mortgage Next Network Stamp Duty is the oldest money-raising trick going. It has been about for well over 300 years and is the oldest tax which is administered by the Inland Revenue.
Stamp Duty was levied in the UK for the first time in 1694 towards carrying on the war against France. It was also a big hit with successive governments and remained in place even when, in 1765, its imposition brought about riots in the American colonies. Perhaps Mortgage Strategy should honour a great historical moment and organise a tea party on the Thames.
The truth is that Stamp Duty – or Stamp Duty Land Tax to give it its full title – is an easy tax for the government to administer and collect, hence the chancellor’s reluctance to do away with it.
The University of Reading recently carried out research on behalf of the Council of Mortgage Lenders and concluded that the current system encourages tax avoidance strategies, such as sellers artificially boosting the value of fixtures and fittings in their properties, and that it also affects first-time buyers more heavily than existing homeowners.
What’s more, Stamp Duty places a greater burden in the south of the county, where it accounts for 75% of residential Stamp Duty revenue, generated from less than 50% of transactions. The research has also concluded that the tax encourages price bunching just below the thresholds where a higher rate applies.
Some commentators argue that, by not linking thresholds to rising property values, the government is applying an automatic stabiliser to the housing market. There is no evidence, however, that this is the government’s strategy or that it has had any stabilising affect on the market. Most people see Stamp Duty simply as a means for the exchequer to make a windfall gain which avoids the need to increase taxes elsewhere.
Chancellor Gordon Brown seems as unwilling as his predecessors to do away with this deeply unpopular tax. Time, I say, for a tea party!