Easy money?

What do wig pow­der and news­pa­pers have in com­mon? They’ve all been sub­ject to Stamp Duty. Rod­er­ick Eas­dale re­counts the his­tory of our least favourite tax

Country Life Every Week - - Property Comment - Edited by An­nun­ci­ata El­wes

MUCH crit­i­cism has been di­rected at our com­pli­cated Stamp Duty Land Tax (SDLT) sys­tem after HMRC ad­mit­ted that, since the sec­ond-home sur­charge was in­tro­duced in April 2016, a shock­ing 15,700 peo­ple have over­paid on it. SDLT, de­spite the name, is no longer a stamp duty, but a self­assessed tax. This re­flects the com­pli­cated his­tory of Stamp Duty, a tax that has mu­tated in ways so strange that it’s been im­posed at times on dice, wig pow­der, hats, gloves, per­fume, patent medicine and cheques. Stamp Duty was in­tro­duced in the UK in 1694, dur­ing Wil­liam and Mary’s reign, in an Act ‘grant­ing to their Majesties sev­eral du­ties upon vel­lum, parch­ment and pa­per, for four years, to­wards car­ry­ing on the war against France’. How­ever, once the tax was im­posed, it stayed. In­deed, so pleased were the politi­cians by their new tax-rais­ing pow­ers, Stamp Duty was ex­tended to items be­yond the ini­tial terms of the Act. They also saw po­lit­i­cal ad­van­tages from ma­nip­u­lat­ing it. The Stamp Act of 1712 im­posed a levy on news­pa­pers and pam­phlets—ex­cept those that were spon­sored by the Govern­ment or Mem­bers of Par­lia­ment. The aim was to sup­press crit­i­cism of politi­cians, as pub­li­ca­tions that were crit­i­cal had to pay a duty of a penny per whole news­pa­per sheet, a half-penny for a half sheet and a shilling for each ad­ver­tise­ment the publi­ca­tion con­tained. One of the re­sults of this un­pop­u­lar ‘tax on knowl­edge’ was that some pub­lish­ers went out of busi­ness. An­other was that news­pa­per pages in­creased in size. Stamp Duty was ex­tended to house pur­chases in the 1950s and, as Alan King of Jack­son-stops ex­plains: ‘It was quite sim­ple when it was in­tro­duced—you paid noth­ing at all on a home up to £30,000 and then 1% of the pur­chase price above that thresh­old. The av­er­age home was only £20,000, so rel­a­tively few paid any duty.’

The sim­plic­ity has long since gone. So, too, have the mod­est tax rates. When Gor­don Brown be­came Chan­cel­lor of the Ex­che­quer, he in­her­ited a straight­for­ward sys­tem of a flat rate of 1% on pur­chases of more than £60,000, the price of an av­er­age home. In what was to be­come his trade­mark with re­gard to tax re­form, he set about mak­ing it more com­pli­cated and more re­ward­ing for the Trea­sury. New bands were in­tro­duced and rates were hiked four times in three years. The an­nual take from prop­erty SDLT rose from £830 mil­lion to £6.5 bil­lion in the first 10 years of the New Labour govern­ment.

Ge­orge Os­borne, an­other Chan­cel­lor who favoured the com­pli­cated over the sim­ple, cre­ated a 3% sur­charge for pur­chases of de­fined sec­ond homes. The top-rate band is now 12%, or 15% for a sec­ond home or buy-to-let prop­erty. Philip Ham­mond then in­tro­duced dif­fer­ent band­ings for most first-time buy­ers.

It’s the sec­ond-home sur­charge that’s caused the most con­fu­sion and some have been in­cor­rectly pay­ing it. Things that may look like a sec­ond home, but nor­mally turn out not to be, in­clude granny flats and an­nexes if bought at the same time as the prin­ci­pal house and worth no more than a third of the over­all price—in­her­ited prop­erty doesn’t count ei­ther. Re­place­ment main res­i­dences pur­chased be­fore the pre­vi­ous one was sold do re­quire the 3% sur­charge be­ing paid, but this can be re­claimed if the pre­vi­ous res­i­dence is sold within three years of the new one be­ing pur­chased.

‘The good news,’ says Mr King, ‘is that those who pay too much SDLT can ap­ply for a full re­fund. How­ever, with many not re­al­is­ing they’ve paid a sur­plus, how many are ac­tu­ally re­ceiv­ing these re­funds?’

An­other bit of good news is that, fol­low­ing the re­peal of the 1712 Stamp Act in 1855, the pub­lish­ers of COUN­TRY LIFE can point out the con­fu­sion caused by the Govern­ment’s un­nec­es­sar­ily com­pli­cated Stamp Duty sys­tem with­out hav­ing to pay Stamp Duty to the Govern­ment to do so.

Stamp Duty was in­tro­duced dur­ing the reign of Wil­liam III and Mary II

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