UK Urged To Reform Second Home Tax

by Jason Gorringe, Tax-News.com, London

01 February 2018

RSM, the professional services firm, has called for reform of the UK's new three percent additional stamp duty charge for those acquiring second homes or buy-to-let properties.

The firm drew attention to new HM Revenue and Customs figures that showed that the additional duty netted an extra GBP2.05bn (USD2.91bn) in 2017. However, it said taxpayers failing to quickly sell their primary residence for another will have been left footing a large and unexpected tax bill.

RSM said this happened in a large number of cases. The firm said: "[A charge arises] when the former home cannot be sold before the new home is purchased. The new measures aimed at buyers purchasing a second property include a repayment scheme if the first house is sold within three years, but the extra three percent SDLT still has to be paid upfront and reclaimed later."

During 2017 more than 15,700 homeowners had to reclaim additional tax totaling GBP231m due to delays with the first property sale, increasing the initial cost burden on homeowners before the tax was repaid by HMRC, RSM said.

George Bull, a senior tax partner at RSM, said the measure may not be efficiently achieving its objective of supporting people to acquire their own home. He said: "The levels of tax revenues generated from the extra three percent SDLT paid on additional properties, such as second homes and buy-to-let properties, will undoubtedly be seen as a win for the Exchequer. However, it is clearly undesirable that people caught in an expensive bridging transaction, who were never the object of the extra three percent stamp duty charge, should be deprived of monies in this way, and then forced to claim repayment. Due to the levels of unsuspecting homeowners being caught out with additional outlay, we urge HMRC to find a better way of administering this part of the SDLT system."

According to a report from the Institute for Fiscal Studies, by 2021–22, the share of capital taxes to total revenue in UK will have doubled relative to 2010, with the UK seeking to transition towards a diminished direct tax base, with a lower corporate income tax rate, and a greater reliance on indirect taxes.

TAGS: tax | property tax | United Kingdom | stamp duty | Tax

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