Stamp Duty Holiday Needed To Get UK Property Market Moving

by Robin Pilgrim, LawAndTax-News.com, London

17 April 2009

PKF Accountants and business advisers is calling on UK Chancellor Alistair Darling to introduce a temporary reduction or suspension of Stamp Duty Land Tax (SDLT) in this month’s Budget.

Marios Gregori, Real Estate Tax Director at PKF explained:

“A short term stimulus, like a temporary reduction or suspension of SDLT, would help to get the property market moving and, with the current difficulties in the credit markets and the cautious approach of lenders, there is little risk of a short term property boom.”

The government collected GBP10bn (USD14bn) in SDLT in 2007/08, but receipts in 2008/09 are expected to be much lower. Of this, Mr Gregori said:

”On very simple projections from the number of property transactions alone, SDLT receipts will be less than GBP5bn (USD7bn) for this financial year, probably much less when you take into account falling asset values. And if 2009/10 activity stays as low as it is now – around a third of the number of monthly transactions we saw in 2007 – annual SDLT receipts could go as low as GBP2.5bn (USD3.7bn)."

“Giving up this amount of revenue for, say, two years to help kick start the property sector – and perhaps boosting related sectors of the economy – seems a small price to pay compared to the billions spent on November’s controversial VAT cut or the money used to prop up banks,” he added.

Such a move would mean setting SDLT rates at zero for two years or, Gregori suggests, “If the Chancellor is feeling brave, he might simply choose to abolish SDLT in its current form. During a two year breathing space, the government could then consult on a new property tax – perhaps one based on the energy efficiency of buildings. This would back up the government’s statements about cutting carbon dioxide targets and creating jobs in the green economy.”

So called ‘zero-carbon homes’ are already exempt from SDLT, but this has yet to have a significant impact on the property market because it is extremely hard to make existing houses zero-carbon.

Mr Gregori continued:

“The government really has to approach green incentives on a broader front, perhaps setting a higher rate of relief for all zero carbon buildings and a lower rate relief for homes and commercial buildings that meet less stringent energy-efficiency standards."

“One thing that is clear, is that the property sector has become such a large driver in our economy that however he chooses to do it, the Chancellor must provide tax breaks in some form that will get it moving again,” he concluded.

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