MPs back extension of radical stamp duty reforms

MPs back extension of radical stamp duty reforms

An influential committee of MPs has backed an extension of radical stamp duty reforms to non-residential sectors, questioning in its latest report why the chancellor did not include commercial sectors in his changes from the outset.

In its Autumn Statement report, published today (13 February), the Treasury Committee was supportive of the stamp duty reform, stating that the reforms were structured in a way that cut stamp duty payments for all properties below £937,000.

This means the tax is applied more progressively and around 98 per cent of housing transactions will attract a reduced tax bill, at a cost of around £800m per year.

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In his fifth Autumn statement, chancellor George Osborne announced buyers will now only pay the rate of tax on the part of the property price within each tax band, much in the same way that income tax is applied.

There will be no tax payable for houses worth less than £125,000, 2 per cent on the portion of any value above this and up to £250,000, 5 per cent on the next portion up to £925,000, 10 per cent up to £1.5m, and 12 per cent thereafter.

Under the new rules, for an £185,000 property you’ll pay nothing on the first £125,000 and 2 per cent on the remaining £60,000. This works out as £1,200, a saving of £650.

The committee’s report documented various reactions to the stamp duty reform, agreeing with the Institute for Fiscal Studies’ analysis questioning why changes were not also made to non-residential stamp duty.

Arguing against any sort of transaction tax on properties, IFS had said residential stamp duty reform meant “a very bad tax [is] transformed into a bad tax”.

The TSC said in a statement: “The committee therefore agrees with the chancellor and the Institute for Fiscal Studies that the design of residential stamp duty was significantly flawed and welcomes its reform in the Autumn Statement.

“However, the unfair and distortionary slab structure continues to apply to stamp duty for non-residential property transactions. The government should explain the reasons for reforming residential stamp duty in this way but not making a similar reform of non-residential stamp duty.”

This follows calls by self invested pension providers to extend the reforms to commerical property to encourage investment by small business owners.

The Institute for Chartered Accountants in England and Wales also welcomed the changes to residential stamp duty, but said that the retention of the slab system for commercial property would “create confusion, uncertainty and potential for arbitrage”.