Stamp duty loophole coming to an end

Graham_Devon

On BBC One's Andrew Marr Show Mr Osborne said: "Rich people, often foreigners who come to this country, but also some people here in Britain, who put homes into companies to avoid stamp duty - that is completely unacceptable.

"We are going to come down on that practice like a tonne of bricks, We are coming after that tax avoidance, we are going to be extremely aggressive in dealing with it, and people are going to face a very punitive charge."

He said there would be new measures announced in the Budget on Wednesday, adding: "People have had their warning. They need to pay stamp duty on the homes they live in."

Wonder how many homes this actually effects?

Likely to be homes in London? Notice George is clear to point out that this is going to hit "homes they live in", yet targets foreigners?!

Call me dumb....but what's this actually going to do if you only target the people who live in these homes, but at the same time, suggest it's mainly foreigners that avoid stamp duty!?

chewmylegoff

I think you're reading too much into his media sound bite. The owners of the property will be the targets. The talk of foreigners simply reflects that a lot of the most expensive property in the country is owned by foreigners buying themselves a London pad.

It will be interesting to see what the govt thinks it can do to close the loophole. Once a property is owned by an offshore company, how can you track the onward sale of the shares in that company?

Really the only way I can see this working is if you make it illegal for foreign corporations to own uk property, and enforce the law by seizing any such properties. That is pretty draconian.

Road_Hog

Marr, is a BBC Marxist.

The government can do nothing about this loophole. The well off can always avoid paying taxes. This is just BBC speak and c0ckwaffle.

vivatifosi

Yesterday on the news there were two numbers: x houses over £1,000,000 were sold according to the Land Registry and x houses were transferred into the ownership of companies (presumably also from the LR). So I think wotsthat's right and that's where the data is from.

It seemed that they could only address the issue at the sale though. There didn't seem to be anything being done about unpaid council tax, a parallel issue for large offshore-registered properties.

RenovationMan

We looked into this when we bought our house because the stamp duty was £13,500. It all seemed a little dodgy and risky so we decided to just pay up. If they are pursuing people who used this dodge and they are able to go back a few years then I'm relieved that we didn't bother with it.

The house value to make the dodge pay was normally the £500k mark because you hit the next stamp duty threshold. This is another one of those taxes where people feel they are intrinsically unfair and so are happy to try and dodge it. If you just paid the higher rates of tax on the amount above the threshold (as you do with income tax) then less people would feel it's a rip off.

e.g. A house bought for £500k is taxed at 3% and would cost £15k in stamp duty
A house bought for £501k is taxed at 4% and would cost £20,040 in stamp duty - over £5k extra in tax for £1 extra in house purchase.

It would also 'bunching' of house prices just under the thresholds.

chewmylegoff

wotsthat wrote: »

I'm not quite sure but wouldn't the sale of a property be registered with the Land Registry even if it's a company buying? If the property is then sold to another company then there's another transaction registered.

If the owner's shares are bought out I suppose there's an avoidance opportunity. That sound like a loophole in a loophole though.

In reality it's going to affect few and be more of an inconvenience rather than a financial issue. I do wonder if the cost of implementation will be covered by the any tax raised.

Well what I understand this to be is that you transfer the property to a company and then sell the company instead of the property. For uk shares you only pay 0.5% stamp duty instead of 5% for the property. If it is an overseas company then no uk taxes apply when the shares change hands (except capital gains if uk domiciled).

When a company buys a property it still has to pay stamp duty as normal, so one company selling a property to another company wouldn't achieve anything. In order to get the property into the company in the first place I think you gift it to avoid paying stamp duty again.

lostinrates

RenovationMan wrote: »

We looked into this when we bought our house because the stamp duty was £13,500. It all seemed a little dodgy and risky so we decided to just pay up. If they are pursuing people who used this dodge and they are able to go back a few years then I'm relieved that we didn't bother with it.
.

We had pretty much the same reaction, we too looked into it.

Our stamp duty was a little more that that, and a figure nearing the average salary in the uk for some properties really does seem worth looking into avoiding, especially if you are not rich enough to be buying outright or nearly outright. If you look at it from a mfw standpoi t that is a very healthy overpay or offset if it can be saved.

Ours would roughly gave covered our bells and whistles carbon neutral heating system ....

But it felt too dodgy and if not illegal than not morally responsible in the end, so we do not have heating, lol.

RenovationMan

lostinrates wrote: »

Ours would roughly gave covered our bells and whistles carbon neutral heating system ....

But it felt too dodgy and if not illegal than not morally responsible in the end, so we do not have heating, lol.

If your house is anything like ours, you're probably better putting in additonal insulation before you bother with the heating system. We had a bells and whistle heatbank connected to boiler stove and gas boiler and all the lovely heat just passes straight through the solid walls.

We're now putting internal wall insulation in as we do each room, I'll let you know if it makes a difference. Meanwhile I'm sat here with a jumper on.

lostinrates

RenovationMan wrote: »

If your house is anything like ours, you're probably better putting in additonal insulation before you bother with the heating system. We had a bells and whistle heatbank connected to boiler stove and gas boiler and all the lovely heat just passes straight through the solid walls.

We're now putting internal wall insulation in as we do each room, I'll let you know if it makes a difference. Meanwhile I'm sat here with a jumper on.

We are hoping to do both really, and Fix the cracks that serve as a reasonably effective ventilation system!

We don't think the main part of the house will need internal wall insulation, but one part certainly does (kitchen, utility rooms and study, all in a victorian single story extention) We have no roof insulation atm:mad: for various reasons. I am positive that will make a substantial difference at retaining heat....but we need to have sopme heat to retain first . The rooms on the north and east side of the house are often if not usually cooler than outside temps.

RenovationMan

lostinrates wrote: »

We are hoping to do both really, and Fix the cracks that serve as a reasonably effective ventilation system!

We don't think the main part of the house will need internal wall insulation, but one part certainly does. We have no roof insulation atm:mad: for various reasons. I am positive that will make a substantial difference at retaining heat....but we need to have sopme heat to retain first . The rooms on the north and east side of the house are often if not usually cooler than outside temps.

We had the roof done pretty much as soon as we moved in, putting multi-foil and Kingspan insulation in the roof itself (we have part vaulted ceilings in all the bedrooms so the ceilings in the bedrooms are the underside of the roof). It made a huge difference in the sound quality of the rooms and in the heat loss. Our house always retains it's snow and frost for a lot longer than other houses in the village.

I was hoping that this would be enough to keep the rooms warm, but the heat just goes out through the solid walls instead.

Oh well, back to the drawing board.

lostinrates

Graham_Devon wrote: »

Wonder how many homes this actually effects?

Likely to be homes in London? Notice George is clear to point out that this is going to hit "homes they live in", yet targets foreigners?!

Call me dumb....but what's this actually going to do if you only target the people who live in these homes, but at the same time, suggest it's mainly foreigners that avoid stamp duty!?

Its really not just homes in lopndopn, thats the point. Our wreck would have saved a whole load, as would a lot of the 'upper middle market and top end' outside london property...the latter a market that while i was still watching was still somewhat changing hands, if with some depressed sales figures.

Stamp duty impacts on 'normal' people with 'normal' incomes, people who need lending to buy homes....not just rich sobs who can buy. Ahouse in each county for cash.

I don't see how it can be retrospectively placed, but perhaps avoiding non uk registered ownership would be an option, i.e. allowing foreign business purchase but only with fully payable stamp duty.

It might even be acceptable to put a surcharge on non dom and non uk purchase of a uk resource we acknowledge is 'in demand' and under pressure?