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NAEA calls for FTB Stamp Duty break to be reinstated

Friday 25th May 2012
Written by Rosalind Renshaw

The National Association of Estate Agents has called for the Stamp Duty break for first-time buyers to be reinstated.

The NAEA has upped the ante in its campaign for reform of the current  Stamp Duty regime after discovering that it netted £5,960m for the Treasury coffers in 2010/11.

This was a 22% increase, up from a take of £4,885m in 2009/10, despite an ailing property market, says the NAEA.
 
The figures show SDLT receipt rose last year in all regions of the UK, apart from Northern Ireland, at a time when there was almost half the number of property transactions as pre-recession.

The highest increase in the revenue made from Stamp Duty was in the East Midlands, at 33.3% (to £240m) followed by 32% in Scotland (to £330m) and 27.7% in London (to £1,980m).
 
Wendy Evans-Scott, NAEA president, said: “The Government’s latest figures show it has received a windfall of £1bn on property transactions in the UK, at the same time as thousands of consumers are struggling to afford even the deposit for a home.

“Clearly, the Chancellor can afford to reinstate the first-time buyer holiday and help boost this vital part of the market, instead of taking the 22% increase in income from this unfair tax.

“The fact that SDLT is fluctuating regardless of the movement in the housing market shows it is an outdated tax that needs urgent reform.”

* Separately, agents should be aware of the outcome of a case involving Stamp Duty Land Tax and a buyer’s efforts to mitigate it by buying chattels separately.

The case, a victory for HMRC, proves that mistakenly identifying a fixture for a chattel can prove costly. It also shows that HMRC will scrutinise transactions at or near the threshold levels.

In Orsman v HMRC (2012 UKFTT227), Miss Orsman paid £250,000 for her home and £8,000 for the chattels, which included £800 for shelving in the garage which were attached via battens. On a purchase of £250,000, she was therefore liable to pay Stamp Duty of £2,500 because the property was at exactly the ‘slab’ threshold.

Had she paid £250,001 for the property, she would have had to pay £7,500 in Stamp Duty.

Her purchase was successfully challenged by HMRC. But what exactly is a chattel? A chattel is a tangible, moveable asset such as carpets, curtains and ‘loose’ white goods like fridges. A chattel is not a fixture such as fitted furniture or built-in white goods.

All HMRC needed to do was to prove that at least £1 of the chattels she had bought were in fact fixtures. A tribunal held that the garage units were fixtures and not chattels, thus landing her with a SDLT bill of £7,524 on a purchase which was raised to £250,800.

One moral of this case is that buyers – and indeed everyone involved in the transaction – need to be very sure about what chattels are, if they are relying on chattels to keep their Stamp Duty costs down.

(12) Comments

Added by stonehenge on 2012-05-26 23:00:22

No point in wasting time lobbying a Government who needs to raise as much in taxes as possible no matter how "unfair".

They ain't goin' to be lis'nin' as there is no election to be fought for the next 3 years. Get real!
Added by anon on 2012-05-26 11:31:09

I think there is possibly an interesting change in behaviour as a result of stamp duty.

I sold our familiy's house in October 2006 fearing a collapse whilst at the same time wanting to move to a house in the country with land to keep our horses.

I found that properties were extremely expensive and given I felt we would only be here for 5 years or so, the paying of stamp duty was exhorbitant. So we decided to look for places to rent. We found a great place and I worked out that the gross rental yield was below 2%. That the non payment of stamp duty effectively paid for the first 2 years of rent. We've been here nearly 6 years now and we have not had a rent rise in all that time and we have a great, professional landlord. It could not have been a better decision as we have made a positive return on the funds released from what would have been a failing investment in houses in our area.

So we may see in terms of 'system', that if you are going to be only in a place for a shortish period of time - be it geographically or a step on the mythical 'ladder' - then it makes sense to consider renting instead of buying. I would only consider buying now if I were to find my final home where I would like to spend the rest of my years.
Added by THE TRUTH on 2012-05-25 16:00:18

Getting desperate now are we : ).
Added by on 2012-05-25 15:52:28

I think Stamp Duty is a terrible tax. But if it brings house prices down (which it is, judging by NAEA's response) I can just about live with it.

Of course, a proper Land Value Tax, combined with eliminating all tax breaks for buy-to-let, could replace Stamp Duty in its entirety. I'm waiting for NAEA to come out in support of that idea - but I won't hold my breath......
Added by Sibley's B'stard Child on 2012-05-25 14:57:52

Ray, re: income tax, some people (I don't know enough to have a strong opinion) believe it's far better to have a flat % annual taxation on land rental value and not to tax income at all.

PeeBee, I see we agree on the flat % SDLT...

Re: FTBs bidding-up prices wiping out the 1% 'gain'? Human nature I guess. Withdraw (or threaten to withdraw) a financial incentive and this happens. I think where FTBs are savvy is in the increase of information available to them (how they choose to act upon - if at all - this information is up to them).
Added by PeeBee on 2012-05-25 14:20:34

Just spent the last hour composing only to be kicked out!!

What I THINK I said was that Ray's suggestion is one possible solution. Mine, which I have mentioned on here many times before (and I note that since Ray, one or two have mentioned something along the lines of this, is for ONE percentage across the board, with NO threshold. Maybe the figure could be one percent; maybe a tad higher. Someone is going to have to crunch numbers, as there are tens of thousands of sales which come in under the current crossbar.

That way, every property transaction would attract Duty. What the Govt lose on the swings will be made up on the roundabout, surely?

Why do the NAEA make more noise about SD than any other subject? Sorry - but death and taxes are unavoidable - and if the NAEA believe that SD alone is the reason why FTBs are not flooding the market, then Arbon House show that they simply do not understand the housing market and how to make it work!

If our HPC posters are to be believed, and that buyers are now uber-savvy and clued-up, then why, as reported in the ridiculous story from earlier in the week, would FTBs have paid var nigh THREE percent extra in the run-up to the SD holiday end in order to 'save' ONE percent?

Beggars belief...
Added by Ray Evans on 2012-05-25 14:16:44

"Much simpler to have a flat % without exception"

Should this also apply to Income Tax?
Wouldn't go down too well would it!

Added by Sibley's B'stard Child on 2012-05-25 13:13:55

Much simpler to have a flat % without exception.

All the SDLT holidays do is inflate prices by an equivalent amount. FTB figures they can save 10k so they bid-up the purchase price accordingly.
Added by Anonymous Coward on 2012-05-25 10:40:18

Oh, I do realise that in the South East that means that everyone will pay, but that is the price you pay for living down here.
Added by Anonymous Coward on 2012-05-25 10:39:01

I've spent years trying to work out why someone pay £1m for a house should pay a higher percentage.

Surely, the idea of a percentage take, rather than a fixed fee means that the scale slides automatically...

Ah, I hear you say, they're rich so they can afford to pay more. Which I suppose could be true, but they do already.

Might I suggest that we take the idea of the UK average price (adjusted annually) and exempt transactions below that figure entirely.

Then everyone buying above that figure pays 2%.

No steps, no jumps.

Very simple.

I would say this is socially just, and a whole lot simpler.
Added by Ray Evans on 2012-05-25 09:33:19

@Philip Fowler on 2012-05-25 09:02:31

In my view that is not the answer and continually messing about with temporary "solutions"' for certain sections of society also is not.

The only fairer way is to change it to a method that increases the percentage payable on the RESIDUE of an amount above certain threshold levels. Decrease the percentage at the lower purchase price level. Get rid of the current method that means if one buys even at just one pound over a threshold the amount of tax payable can increase by as much as three times on the total price!

I realise that it would take some fine tuning and as the
government is on such a good thing here they will be very reluctant to do anything at all?
Added by Philip Fowler on 2012-05-25 09:02:31

About time too. I have been lobbying my MP and written directly to No10 about not only this but also changing the Stamp Duty to 2% at £250k and then 3% at £350k, 4% at £500k. More agents need to put pen to paper and talk to their MPs.

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