Proposals to bring stamp duty up to date with the internet age could cost the property industry £200m pa, a leading tax expert has warned.
The Inland Revenue is considering the introduction of the reform in next year’s Budget so that it can be levied on conveyancing transactions that take place in cyberspace as well as on paper.
The IR is also considering proposals to bring forward the date on which stamp duty is levied from the completion of contracts to the point of exchange.
Arthur Andersen tax partner Patrick Cannon estimates that these reforms could cost the industry £100m to £200m because many firms “rest on contract” to avoid completion so that they don’t have to pay stamp duty. The tactic has become increasingly popular, particularly with institutional investors, since this year’s Budget caused stamp duty transactions worth more than £500,000 to rise to 4% of the total.
Describing the IR’s proposal as a “stealth tax”, Cannon said the proposals would dramatically reduce liquidity in the property industry. “This is yet another burden on the property industry,” he said.
MEPC’s head of taxation Peter Batchelor predicted that reform which took account of e-conveyancing was “inevitable”. But he said any change would need to be well thought through. “There could be situations where you could exchange but never complete because the deal has collapsed.”
The reforms are not expected to trigger a change in the rate of stamp duty, which netted the government between £3bn and £4bn last year.
References: EGi News 13/07/00
