Robin hood style stamp duty change will help first time buyers
but will create uncertainties
If you are writing on the Budget announcement that the stamp
duty land tax exemption for residential properties has increased up
to the value of £250,000 for first time buyers, please consider the
following comment from Karen Campbell, Head of Stamp Taxes at Grant
Thornton UK LLP:
Leading business and financial adviser Grant Thornton UK LLP
says the increase in the threshold of stamp duty land tax (SDLT*)
for first time buyers wishing to purchase residential property up
to the value of £250,000 is a welcome vote-winner, although clear
guidelines defining first-time buyers are needed.
The SDLT relief for those purchasing property to the value of
£250,000 may help stimulate the market and aid the new build
property market which has experienced very difficult times since
2007. However, this is a 'Robin-hood' style move that will see
those purchasing homes worth over £1million suffer an increase to
5% on rates from April 2011.
The SDLT 'holiday' will be introduced tomorrow and the
Chancellor believes nine out of ten first time buyers will pay no
Stamp Duty at all.
Karen Campbell, Head of Stamp Taxes at Grant Thornton, is
pleased that the Government is making an effort to revive the
residential market by using the tax system but says a clear
definition of a first-time buyer must be established to avoid
exploitation of the relief.
Campbell says: "This is a 'better late than never' move. However
I suspect that this change will immediately fall into difficulty as
there is little clarity in how to establish if a person is a first
time buyer which could potentially encourage abuse. For example,
there is currently scope for a couple that co-habit to assign the
ownership of a new house to the partner who is a first time buyer,
consequently avoiding SDLT.
"Failure to identify legitimate first time buyers will throw off
kilter the Government's careful plan to create a tax-neutral, but
vote-winning measure and place a further burden on public finances.
A similar measure in the US led to mass exploitation of the relief
and substantial costs to Government.
"This pre-election sweetener will be tainted for those who have
to deal with the red tape and consequently safeguards will be
needed to prevent abuse. As it has not been clarified who will be
monitoring qualification, it is likely that it will fall to
solicitors and this will be a thankless task. The relief will not
help most first time buyers as the deposits required to secure a
property are still high due to reduced bank lending.
"In addition, delaying the implementation of the 5% rate
provides impetus to those planning to purchase a house over the
value of £1 million to act now in order to save a potential
£10,000.
"Also announced were plans to introduce targeted anti-avoidance
measures designed to clampdown on Stamp Duty schemes exploiting
loop holes in the rules for partnerships. This will affect both the
residential and commercial sector."
For further information,
please contact:
Nicola Daley, Grant Thornton press
office 020 7728 2244 nicola.daley@gtuk.com