Hopes rise that top rate of stamp duty may be cut
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TAX experts believe the Chancellor has the chance to take action to cut the top rate of stamp duty this week citing a fall in tax revenues as sales of upmarket homes collapse. George Osborne will on Wednesday deliver his third set-piece Budget statement this year and experts predict the controversial 12 per cent top rate of stamp duty is likely to be reduced.
Accountancy firm PricewaterhouseCoopers said: ‘There has been a lot of attention on the Government’s stamp duty revenues tumbling since the rates were increased.
‘If the Chancellor believes the increased rates have served their intended purpose of slowing down the escalating property market – particularly in the capital – he could potentially reduce the higher rate.’
Research for The Mail on Sunday, conducted by estate agency Knight Frank earlier this month, showed that revenues from the most expensive London boroughs have dipped since the duty was overhauled last December. The number of transactions has fallen by up to a fifth.
A similar regime introduced in Scotland led to a £40million shortfall in revenues after six months, it emerged last week.
Benson Beard, a Chelsea-based estate agent at Bective Leslie Marsh, said the high rate was responsible for making householders decide against moving and instead to opt for extending their existing homes. He said: ‘Builders are laughing.’
Bruce Ritchie, chief executive of developer Residential Land, said the high rate of stamp duty could also be hitting the number of affordable homes being built.
‘This is because the profit generated on flats of £1.5million-plus on a large development funds the affordable housing that is also built as a result of the development,’ he told Property Week magazine.
‘Put simply, higher stamp duty at the top end is choking off the supply of affordable housing with the result being that fewer homes overall are built.’
Meanwhile, petrol retailers fear sales of diesel fuel could be hit if the Chancellor goes ahead with an expected 2p-per-litre duty increase in the Budget statement.
Osborne has been tipped to act in the wake of the Volkswagen scandal which revealed that some of its diesel cars had been rigged to disguise the level of harmful gases they emitted.
The Petrol Retailers Association has written to Osborne urging him not to put more duty on diesel, which is currently set at 57.95p per litre, which is the same as petrol.
MPs on Friday urged him to introduce a diesel scrappage scheme and hit drivers with a tax hike to encourage the move away from diesel.
Public finance figures have been weaker than predicted so he may have to say that he will borrow more than expected this year.
A spokesman for the Treasury declined to comment on specific items in the Autumn Statement.
BUSINESS leaders – still reeling from the cost of the new National Living Wage and pensions autoenrolment – fear George Osborne will clamp down on the use of freelance staff and fail to tackle reform of the rates system in Wednesday’s Autumn Statement.
IPSE, a body that represents the self-employed, believes the Chancellor could limit contracts to just a month for freelancers, after which they would be forced on to the client’s payroll.
Simon McVicker, head of policy and external affairs at IPSE, said: ‘The result would be businesses losing out on the expertise and innovation independent professionals provide. IPSE is very clear that this could cause catastrophic damage to the flexible labour market and the wider economy. The Government should not even be considering such an idea.’
IPSE argues this would be a direct attack on Britain’s smallest firms.
The Forum of Private Business expects to hear the outcome of the Government’s consultation on removing the tax relief that freelancers receive on travel and subsistence expenses on Wednesday.
It is urging the Chancellor to reconsider, as the smallest businesses are often hit by high costs when required to travel to and from clients’ premises. IPSE research found that nearly one in five freelancers thinks removing the relief might ultimately put them out of business. It also places them at a huge competitive disadvantage to very large firms, which will still be able to claim the relief.
The Institute of Chartered Accountants for England and Wales has urged the Chancellor to leave small firms alone and its director of business, Stephen Ibbotson, said many are still coming to terms with changes from the post-Election Budget, such as the National Living Wage. ICAEW research found that 37 per cent of members expect the firms they work for to cut recruitment because of the Living Wage.
Ibbotson said: ‘Many of the businesses impacted agree that the reduction in corporation tax can’t offset the negative implications of measures announced in July. By not announcing any more bombshells in the Autumn Statement, the Government has a chance to give businesses the opportunity to plan with confidence for the longer term.’
Last year the British Chambers of Commerce urged the Chancellor to use his Autumn Statement to address ‘spiralling’ business rate bills. It called for the Government to completely reform the business rates system by 2015, with a ‘new, more responsive and transparent system enacted early in the next Parliament’. In October this year the Government outlined plans to devolve significant control over business rates to local areas, which will see local councils retain all the revenue they collect in rates, and gain new powers to vary rates in some circumstances.
But BCC executive director of policy Adam Marshall said: ‘Reform of the business rates system has stalled. Ministers have focused too much on devolving rates powers, and too little on addressing the deeprooted failings of an outdated and poorly-designed system that hits companies hard before they turn over a single pound.’ Meanwhile, the BCC is calling on the Government to provide clarity on the apprenticeship levy.
In a letter to Ministers, it has said ambiguity in the levy has led many firms to put investment and training plans on hold. The levy is supposed to help tackle skills shortages, but the BCC says that since it was announced there has been no more information on how it will work, how it will be set or on a definition of what constitutes a ‘large employer’ responsible for paying it.