UK Stamp Duty Move Dubbed 'Short-Sighted' By Tax Lawyers

by Jason Gorringe, Tax-News.com, London

03 September 2008

City law firm Denton Wilde Sapte has this week commented on the temporary lifting of the stamp duty threshold in the United Kingdom.

In an attempt to bolster the ailing housing market, UK Chancellor of the Exchequer, Alistair Darling announced on Tuesday that the stamp duty land tax threshold would be increased for purchases of residential property.

The relief applies to transactions with an effective date on or after September 3, 2008, and before September 3, 2009.

It provides an exemption from stamp duty land tax for land transactions consisting entirely of residential property where the chargeable consideration is not more than GBP175,000.

However, commenting on the move, Denton Wilde Sapte tax partner, Jeremy Cape suggested that the Chancellor's decision was a short-sighted one.

"The real problem remains the way in which stamp duty is calculated. The stamp duty on a GBP250,000 house is GBP2,500. The stamp duty on a GBP250,001 house is GBP7,505, an increase of 300%," he explained.

Mr Cape went on to predict that:

"This may result in further downward pressure on house prices in the GBP175,000 to GBP200,000 price bracket, and potential purchasers of higher-value properties may continue to hold off purchasing in case the Chancellor extends the holiday in the autumn."

Also commenting this week, Leonie Kerswill, tax partner at PricewaterhouseCoopers LLP made a similar observation:

“However, the nature of stamp duty means that this doesn't help those buying more expensive properties. For those living in areas with high property prices such as London, with the average house prices well over the GBP175,000 bracket, buyers will still have to find the stamp duty - more usually at 3% or 4% - on the whole purchase price."

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