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CML moots scrapping Stamp Duty for NewBuy

The Council of Mortgage Lenders is urging the government to rethink the way it calculates Stamp Duty and says there may be a case for removing it altogether for NewBuy transactions.

In its latest issue of News & Views today, the CML says the government is giving out mixed messages by still charging Stamp Duty for its NewBuy scheme.

It says: “On the one hand, the NewBuy scheme assists creditworthy but cash-constrained households by supporting transactions where the deposit may be as small as 5%. 

“But many of those targeted would at the same time face a prospective Stamp Duty bill of as much as 3% (on purchases over £250,000), which they still have to fund directly. There may be a case for removing this inconsistency.”

Its newsletter looks at ways in which the government could reform the tax.

The CML has long advocated a fundamental reform of Stamp Duty, away from its current slab structure – under which duty is charged at the highest rate on the whole purchase price, including the parts below lower thresholds- to a marginal rate system similar to income tax. 

The Scottish government recently launched a consultation proposing a move away from the UK’s slab approach to a progressive system where the amount paid is more closely related to the value of the property. 

It has also signalled a wish to lighten the tax burden at the lowest end of the market.

The CML says that in almost all cases, however, an unavoidable consequence of a switch from the current slab structure to a marginal rate system would be that it creates potential winners and losers.

But it says if we were to retain the current Stamp Duty bands and rates of duty it would create only winners, because the higher rates of duty would then only be levied on that part of a property’s value above lower rate thresholds. The downside of such an arrangement however is that much less Stamp Duty is likely to be collected. 

It says if the system is to be redesigned so as to preserve government revenue, this may also result in some substantial winners and losers. 

As a result, it says at the UK level, this may leave Stamp Duty reform on the sidelines, especially in a period when the government’s broader fiscal strategy makes it difficult to forego revenue. 

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  • Sharon Buthlay 26th June 2012 at 4:37 pm

    Whilst promoting the Government New Buy scheme is assisting first time buyers to get onto the property ladder it is not helping the rest of the property market. By constantly incentivising the purchase of new build properties first time buyers will ignore older properties meaning that the first time buyers needed to start off chains of transactions are no longer there. This rebounds not only on the sellers of older properties but on the market as a whole. A further tax incentive for new buy would disproportionately affect the housing market. In Ireland where stamp duty is not paid on new build but only on older property there was a huge increase in property development, people with older properties could not sell at all and now all those new build properties are laying vacant and un-sold to to the recession. We need a government incentive to first time buyers not only for new build but for second time and older properties too.