BPF Report Says UK Property Taxes Encourage Dodges

by Jason Gorringe, Tax-News.com, London

10 April 2002

A new report commissioned by the British Property Foundation has suggested that high taxation of the United Kingdom's property sector has encouraged businesses and high net worth individuals to establish a range of complex tax avoidance structures.

The BPF study is intended to shock the government out of its complacency regarding the country's property market - according to Andrew Scott, the report's author, the Inland Revenue collected around £1.5 billion in stamp duty from the commercial property industry last year alone.

'The recent increases in stamp duty implicitly suggest that the government sees property as an asset fixed in supply with no productive role, which can be heavily taxed with no adverse economic consequences,' the London Business School Associate Economics Professor explained.

The BPF report also suggests that, in addition to spawning unknown numbers of tax avoidance schemes, there is evidence that increasing stamp duty on UK property is beginning to affect the market. According to recent estimates, although the value of commercial property transactions continued to increase in the year to June 2001, the number of deals fell 25% from 122,000 to 92,000.

Speaking earlier this week, British Property Foundation General Director, Liz Peace argued that if the top level of stamp duty on property transactions was reduced from 4% to 2%, tax avoidance schemes would become less profitable and commercially attractive.

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