Is a 7% stamp duty a workable mansion tax?

 
Chancellor of the Exchequer George Osborne Collecting a 7% stamp duty could be a challenge

Senior Lib Dems argue that the 7% stamp duty rate being introduced in today's budget on residential properties worth more than £2m is not far off a mansion tax.

It is equivalent to more than 0.5% a year for a property held for 10 years. And if it is actually paid, the annual yield could be hundreds of millions of pounds a year - such has been the inflation in the prices of swanky homes in London and the south east over recent years.

The question is whether it will actually be paid. Vast numbers of expensive properties have been transferred into the ownership of offshore companies - where the stamp duty charge is just 0.5% when the offshore company is purchased.

HMRC thinks it can abolish the loophole which allows this much lower charge on offshore companies.

But accountants warn it won't be easy: the government dare not introduce a 7% stamp duty charge on purchases of shares in all companies; and if the higher stamp rate is restricted to companies whose only asset is a house, proving that's the case won't be easy for companies registered in secretive tax havens such as the Cayman Islands.

George Osborne may say he'll get the extra stamp duty from Russian oligarchs, oil sheikhs, bankers, rockstars and footballers. But their famous creativity in avoiding tax tends to be hard to squish.

 
Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    +8

    Comment number 1.

    Why can't these very rich people just pay the bleedin tax?

  • rate this
    +2

    Comment number 2.

    There's a reliable way to target oligarchs - last night's Voice of Russia news reported that a tax on private jets is being considered over there. Whether they're bought by individuals or shell corporations, they're only ever bought for one purpose.

    As for our own system - maybe we just need a decade of cutting out allowances, reliefs, credits and benefits first, so we at least know where we are.

  • rate this
    +17

    Comment number 3.

    Simple: you make it cheaper to pay the stamp duty, than the alternative. Achieve this by introducing an annual tax to pay on any properties where the owner is not the resident. This would include business-owned houses and second homes.

  • rate this
    +2

    Comment number 4.

    Capital taxes are to be avoided in general. Most stamp duty is just added to the mortgage. People shoild not have to go into debt to pay it. There are so few houses over £2m that it would not raise very much money. It would be better to tax income. If you earn here you pay tax here. The US has is quite strict on this we should be.

  • rate this
    +18

    Comment number 5.

    Amazing how everybody assumes the rich are all charities, set to give out their money. I'd like to see the first Euromillions winner donate the bulk of their money, perhaps that will set a trend. Bottom line, the rich behave no differently from you or I - everybody wants to keep what they have. Not saying that's good, that's just how it is.

 

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