Not that it makes any damn difference of course

Could Boris make stamp duty payable by the seller, not the buyer?
LAUREN DAVIDSON
PERSONAL FINANCE EDITOR

Not to the incidence of the tax.

Although charging the tax to the people who demonstrably have a large cheque in their hands seems reasonable enough.

So, why wasn’t it done before? Because the tax was actually a charge for the registration of the new ownership of the property. Only once it became a tax, rather than a simple charge, id it even become an issue.

22 comments on “Not that it makes any damn difference of course

  1. Not being a financial wizard, or financial anything to be honest, I can’t understand why stamp duty increases in line with the value, or purchase price, of a property. I understand it involves nothing more than deleting one name from a register and inserting a new one? The cost of doing this would be the same in Bournemouth as it would in Darlington for similar sized properties, so why is the value of the property relevant? Devious ploys by greedy, grasping, government? Surely not?

  2. You can do the transfer online for a few quid. And it doesn’t matter where the tax is applied, the punter will pay. Buyer, seller, shared, it doesn’t matter. It will go on the price, and the price is not determined by some government defined percentage but the usual economic factors.

  3. Rhoda,
    Sorry, but I still don’t understand. What are “the usual economic factors”?
    I want to sell my now overly large house and downsize, following the death of my wife some time ago. Whoever buys this house will will have to pay the government thousands of Pounds in stamp duty (change of ownership tax). When I buy my new property, I will also have to give the government thousands of Pounds in stamp duty. Why?
    The idiots in charge keep bleating on about elderly blocking housing by staying in overly large properties, then demand a shed load of money when we try to downsize. Why can’t they see that if they give us an incentive, we will free up our properties and move? Slightly off topic, I know, and apologise for that.

  4. Incentives matter. Under a seller-pays system, the seller could take the proceeds of sale from the buyer, but instead of mailing the £20,000 cheque the taxman, he leaves the country and moves back to Poland/India/insert-as-required. At worst he’s still the registered owner of the property; while the poor buyer is left out of pocket.

  5. Andrew,
    Not certain if your comment is in reply to mine, but the incentive I was thinking about was making stamp duty a flat rate. My property has been valued at £350,000. The stamp duty on that is £7,500. A smaller property for me, in this area, would cost me about £2,500 in stamp duty. That’s £10,000 the government will receive on those 2 transactions alone which will cost, at the most, about £500 to change a few names.
    The incentive I was thinking about was stamp duty being a flat rate act is the board and, for people like me, elderly or widowed wanting to downsize, stamp duty be at a reduced rate or excused completely.
    House sales are usually still dealt with through solicitors receiving the sums agreed and passing it on to their client after all necessary fees have been paid, so the scenario you gave should not apply.
    SoT, I wonder where you live if you are quoting £20,000 in stamp duty?

  6. The buyer sticks it on their mortgage and so doesn’t really notice, which makes it quite a nice stealth tax, if you’re in the Gordon Brown school of Chancellorship.

  7. “The buyer sticks it on their mortgage and so doesn’t really notice, which makes it quite a nice stealth tax”
    Suppose the buyer who wins the bidding has stretched to £350,000. That’s money he *has* to let go. It doesn’t really matter to him the precise moment at which the government takes its cut.
    Likewise, the seller knew he was getting £342,500 in the end when he agreed to sell.
    Who actually writes the £7500 cheque is a subjective matter. Objectively, money is taken out of the chain, and that reduces the inclination to downsell.

  8. It’s a clever wheeze to keep those at the base of the pyramid interested and make them think they are saving money. Mugs.

    It will also give house prices another upward shove, after the panic-inducing slight fall we had last year. We know the amount people actually pay will remain the same regardless, but the actual price will rise to include the tax.

    So all the homeys can convince themselves the gravy train is still accelerating towards their retire-at-50 future.

  9. interesting fact….

    Couple get married. Wife previously owned £500,000 property in her own name with £400,000 mortgage.

    Wife makes husband joint owner and joint mortgagee.

    Is there CGT? No, doesn’t apply to spousal exemption.

    Is there Stamp Duty Land tax? Yes. Despite no money changing hands, husband has taken on half of mortgage. This is ‘consideration’. No spousal exemption on SDLT.

    Stamp Duty calculated on £200,000.

  10. Is there CGT? No, doesn’t apply to spousal exemption.

    In a case where prior to marriage each owns a property and they move into one property together and let the other. After a short period (12 months? 18 months?) CGT becomes payable on the let property when sold so there’s an incentive to churn.

  11. @TMB

    Not right.

    If each owned a property that was their main residence, one of them moving in with the other would not lose main residence relief for the period they had lived there. Any gain on a property which goes “main residence” then “let” is pro-rated.

    The period you are referring to (currently 18 months, down to 9 months after April 2020) is a concession whereby the last 18 (soon to be 9) months of ownership of a property which has been at any point a main residence is treated as qualifying for main residence relief automatically.

    e.g. property main residence for 5 years, then let for 5 years.

    Currently first 5 years of ownership and last 18 months of ownership qualify for main residence relief.

    Then there’s lettings relief on top of that. That’s being (pretty much) abolished in April 2020 but currently excludes up to £40,000 of any gain not otherwise excluded.

    One of the standard in-jokes in my profession is that the biggest (and worst) firm of tax advisers is “My Mate Down The Pub” as we’re always being told about crazy tax advice from our clients that they have heard from their mate down the pub.

  12. @AndrewC

    Thanks for that. I was referring not to the wisdom of my mate down the pub but the experience of a nephew who having moved in with his recently acquired wife, put his flat on the market at a specific point to avoid CGT.

    I’m not sure I quite understand your para beginning e.g. but in his case he (being young) had not owned his own flat for five years so perhaps the period he was able to let the flat was short on that account.

    We might possibly agree that what seems arcane to me and mundane to you has the effect of distorting the housing market which is unhelpful in that it creates incentives for people to do what they otherwise wouldn’t.

  13. MB and Andrew C, I thank Christ I don’t live in the Dis-United Kingdom with byzantine rules like that.

  14. Tim Worstall said:
    “It used to be a fee for a service. Now it’s a tax.”

    Actually it was always a tax, always designed to make a profit. It’s just that they’ve now realised that they can rake in even more than they thought.

    It was brought over here by Dutch William, and the first Stamp Act was “An act for granting to their Majesties several duties upon vellum, parchment and paper, for four years, towards carrying on the war against France.”

    A sound objective, but a dodgy tax.

  15. I understand that Boris has proclaimed that, if elected Prime Minister, he will halve the rate of Stamp Duty for properties over £500,000, and cancel it completely for properties under £500,000. Can see house sales, including mine, stalling for a while. Bugger!

  16. Hello TMB

    Not sure how long your nephew had owned the property before marrying but sounds like he may have had duff advice if told he lost the CGT main residence relief he had accrued while living there if he didn’t sell within 18 months of moving out.

    Think of the period he lived there as main residence as being ‘banked’. He can’t lose that.

    If he lived there for just a year or two, he still keeps it on a pro-rated basis.

    Say he lived there for a year and then started renting it and did so for 9 years. He sells the house after 10 years total ownership and makes a gain of £100,000 (nice round numbers help)

    So – pro-rate – 1/10 of the gain is exempt – main residence relief.
    Currently last 18 months ownership also qualify as main residence by concession, so that’s 3/20 of gain also exempt.

    Total exempt as main residence £25,000. Chargeable gain £75,000.

    Then lettings relief (this is obscure for most people but well known by any competent tax adviser*).

    Lettings relief would exempt the lower of

    1) The gain relating to the letting period – in this case £75,000
    2) The gain relating to the period of main residence – in this case £10,000
    3) £40,000

    Obviously the lower of those three is £10,000 so lettings relief of £10,000 would apply.

    Total gain £100,000
    Chargeable gain £100,000 – (£10,000 + £15,000 + £10,000)

    Chargeable gain £65,000.

    Obviously your nephew would have transferred the property into joint ownership with his wife (or at the very least drawn up a trust deed declaring that he held it 50% beneficial ownership for his wife). Then there are two nil-rate CGT bands available.

    Lettings relief can be worth a deduction of up to £40,000 off the gain – worth up to £11,200 in CGT. Anyone giving tax advice who misses this really shouldn’t be in the business*

    *unsurprisingly Spud made a tit of himself on his blog answering a query a ‘friend’ of mine raised as his answer showed he didn’t know about this relief.

  17. Sorry

    “2) The gain relating to the period of main residence – in this case £10,000”

    Should read £25,000 of course because the 18 months concession period at the end of the period of ownership counts.

    Chargeable gain is £50,000.

    So you see a £100k gain turns into just £50,000 chargeable gain because of a one year main residence period.

  18. I would say that I am surprised that the Greenies aren’t pushing for the total abolition of SDLT. When people get new jobs they weigh up the costs of moving house for the job (SDLT, selling fees, general hassle) against the benefits (shorter commutes, known neighbours etc).

    Having a stamp duty on property sales encourages longer commutes due to discouraging people from moving house to be closer to work. It would be interesting to see whether anyone has worked out an estimate for the environmental cost of Stamp Duty!

  19. It won’t make any difference to the incidence of the tax, but… Currently if I want to buy a £500k house on a 90% LTV mortgage, I need £50k deposit plus £15k stamp = £65k cash. If I buy a £515k house with no stamp to pay, I need £13,500 _less_ cash.

  20. Andrew M – your seller probably can’t skip the country so easily.

    The proceeds of sale will be received by their solicitors, who have a duty to ensure that no tax is avoided and so will pay the SDLT out of the gross proceeds before handing over the net.

    It’s moving that way with capital gains tax. I was doing some tax presentations to law firms recently (unofficial title: ‘Tax issues lawyers keep cocking up and really ought to take advice on’) where the compliance partners sat up suddenly as soon as I mentioned the Corporate Criminal Offence and how it might apply to their offshore clients…

  21. If it were paid by the seller, then house prices would immediately rise.

    Presumably it would be mortgagable too, instead of an addition to the deposit as it is now.

    And loads of people who paid stamp duty when they bought a house would feel that they have been cheated when they sell. I’m not sure I would be able to avoid that feeling myself.

    All these smart arses saying it would make zero difference!

Leave a Reply

Name and email are required. Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.