The Association of Taxation Technicians (ATT) is concerned that the Government is pressing ahead with a higher three per cent stamp duty charge despite warnings about its impact on those who purchase property jointly and those who find themselves in a bridging loan situation.
Although the period in which an individual has to replace a main residence has been increased from 18 months to 36 months, as announced in last Wednesday’s Budget, the ATT is still worried about how this charge will work.
Yvette Nunn, Co-Chair of the ATT’s Technical Steering Group, said
“It is extremely disappointing that the Government has failed to listen to the issues we raised with the design of this measure. As we have expressed previously1, the new charge will affect buyers who unexpectedly find themselves in a bridging loan situation. While it might be a comfort to some to know that, if they sell their original property within the permitted 36 month period they can claim a refund of any higher rate stamp duty they have to pay, it is not going to be of much use to a good number of other buyers who find that the additional cost - albeit hopefully temporary - of the stamp duty stretches their already dire financial resources beyond breaking point. They will have no choice but to pull out of the purchase, risking the collapse of the whole chain.”
The Government has also decided to go ahead with plans to treat married couples as ‘one-unit’ for the purposes of this charge, which the ATT has told the Government risks eroding the foundation of independent taxation.
Joint purchasers will also be treated similarly in that if one of the joint purchasers already owns another property and the joint purchase is not the replacement of a main residence for both purchasers, the higher rate of stamp duty will apply to the whole value of the transaction. This will affect parents assisting young adult children with getting on to the property ladder if they add their name to the mortgage.
Yvette Nunn said:
“This seems particularly harsh as it seems to affect the very people that the Government is trying to help – young first time buyers trying to get on the property ladder. It is also affecting the middle earning members of society – those who want to help their children but cannot afford to give them the money for a deposit outright. The Government has rejected our suggestion that there should be an apportionment system so that the share being purchased by the young adult child, for instance, does not suffer the higher rates. The Government said this would add complexity to the tax system and the approach it is taking is simple. It might be simple but it is incredibly unfair”.
The Government has also announced that the higher rate will apply to purchases of any residential properties by a company from 1 April 2016. There will be no exemption for large investors, as previously consulted upon. The higher rate will also apply to any purchases of residential property by trusts from 1 April 2016, except for those trusts with a life interest where the circumstances of the life tenant will be considered in determining the amount of the stamp duty to be levied.
Notes for editors
- See previous ATT press release: Government’s ‘Cupid Tax’ is unfair and flawed, warn tax experts
- ATT’s response to the original consultation can be viewed here