UK tax authorities close property stamp duty loophole
While the UK government continues its battle against tax evasion and tax avoidance, the authorities have received welcome support from the High Court with a ruling backing last year’s bid to stop investors avoiding stamp duty. In simple terms, savvy investors were transferring ownership of property to an offshore company and rather than selling the property to a buyer, they simply sold the company. So what were the benefits of this?
The simple benefit was a reduction in stamp duty from 5% down to 0.5% on properties valued between £1 million and £2 million. This has been an issue the authorities have been trying to address for some time now amid concerns that tax receipts were being hit and the authorities, and the UK public, were not benefiting from ongoing significant investment in UK real estate.
Challenged in the High Court
Blackfriars Tax Solutions LLP was the party which challenged the tax authorities in the UK High Court and eventually lost their case. The appeal was thrown out with the presiding judge stating “everybody buying property needs to pay their fair share of stamp duty and tax”. This commonsense approach to the issue of property and taxation was welcomed by the authorities and traditional investors.
Quote from PropertyForum.com : “Over the last few days a number of property experts have expressed their concerns that the booming UK property market could be a major threat to the UK economy in the short term. There are worries that once interest rates start to tick upwards this will cause a major shift in sentiment towards the UK property market and could have a damaging impact upon family finances.”
The Inland Revenue believes that the closing of this particular loophole, with many more still to tackle, could boost UK tax revenues by in excess of £160 million a year. This ongoing battle to keep up with complicated tax structuring is something that the authorities have invested significant time, effort and money of late. These challenges will become more commonplace as the High Court becomes the venue of choice to ratify changes.
Property tax income increasing
While the ever growing cost of property in the UK is grabbing the headlines, it is worth noting that this situation is adding billions of pounds to the coffers of the UK tax authorities. You could argue that this puts the government of the day in a very tricky situation. Increased taxes at this moment in time help to offset challenging austerity measures and give the government of the day more funding for the future.
Many experts believe that the issue of overseas investors looking towards the London market, and other areas of the UK, is perhaps the most challenging in the short to medium term. We have seen billions upon billions of pounds poured into the London property market pushing prices to levels never seen before. As property becomes scarce in central London this phenomenon is slowly but surely rippling into the outskirts of London. This is leading to more and more people struggling to climb aboard the property ladder forcing them into rental arrangements – which yet again adds to the upward pricing pressure with buy to let investors very active