Stamp duty surcharge is a ‘by the back door’ tax hike

Almost 40% of Stamp Duty Land Tax (SDLT) raised in the third quarter of the year came from property transactions which were subject to the 3% surcharge for additional homes, including buy-to-let properties, suggesting that the introduction of surcharge was effectively an increase to SDLT rates ‘by the back door’, according to Blick Rothenberg.

The London based chartered accountants believes that the government’s latest quarterly SDLT statistics, which show that the additional 3% SDLT surcharge has collected an extra £670m for the Treasury since 1 April 2016, backs up its claim that the levy is merely a tax raid on those investing in property, including buy-to-let landlords adding to their portfolios.

Nimesh Shah, Partner at Blick Rothenberg, said: “We are probably looking at the highest number of SDLT receipts ever for one quarter. But the fact that nearly 40% comes from property transactions which were subject to the 3% surcharge confirms our suspicions that the introduction of this measure was effectively an increase to SDLT rates ‘by the back door’.”

The government altered the way SDLT was calculated in December 2014, to remove the ‘cliff edge’ method, and replacing with the current progressive rates system. Following this change, there was a marked reduction in SDLT revenue, as buyers purchasing homes costing less than £937,500 were better off under the new system. 

The government fully expected SDLT take to reduce and projected at the time the new system would cost the Treasury £395m in 2014/15 and £760m in 2015/16.

Nimesh added: “The introduction of the 3% surcharge from 1 April 2016 re-balances that lost tax revenue from the earlier change and the latest figures would confirm that it worked.”

Paul Haywood-Schiefer, assistant manager at Blick Rothenberg, said: “This is almost a 100% increase on the position in Q2 of 2016, where the sales of second or additional properties only amounted 21% of the total SDLT receipts. The likelihood is though that many of the sales of second or additional properties had been rushed through in March to beat the 3% rise.”

He added: “Whilst Q4 of 2015 and Q1 of 2016 saw 112,560 more residential sales than Q2 and Q3 of 2016 (689,720 to 577,160), the tax receipts collected were £477m less (£3,707m to £4,184m). It is clear that the additional 3% is making a difference.”

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