The Chartered Institute of Taxation (CIOT) is appealing to the Government to hold off on adding further complexity to the taxation of residential property after a spate of changes in recent years, or risk further confusing the public and those involved in property transactions such as conveyancers.
The CIOT set out its concerns in a response to the recent consultation on the planned one per cent Stamp Duty Land Tax (SDLT) surcharge on non-UK residents purchasing residential property in England and Northern Ireland.1 A final date for the surcharge is yet to be set. The Government believes that non-UK resident buyers are pushing up house prices for UK residents.
Brian Slater, Chair of CIOT’s Property Taxes Sub-committee, said:
“We are concerned at the increasing complexity of tax rules that touch on residential property. Stamp Duty Land Tax (SDLT) has been the subject of technical change in virtually every year since its introduction in 2003.2 The complexity of SDLT will be compounded by the planned one per cent surcharge. We urge the Government to refrain from making further changes before the impact of recent changes to the taxation of residential property are assessed and the evidence base for the surcharge is evaluated fully.
“This policy measure is aimed at house price inflation that, in turn, needs to be considered in the context of other recent taxation changes affecting non-UK resident buyers such as the introduction in 2015 of non-resident capital gains tax and the extension of inheritance tax in 2017 to non-UK companies owning residential property. The full impact of these measures is yet to be seen.”
Brian Slater added:
“The Government is considering an upfront relief from the one per cent surcharge for Crown employees who are on overseas postings. It is not clear to us why that relief should not apply equally to employees on fixed term secondment overseas in the private sector who are subject to UK income tax.
“A non-resident buyer who has incurred the one per cent but who takes up residence in the UK shortly afterwards can claim a refund but that process inevitably adds additional administration and resourcing issues for HMRC.“
In the 2017 Better Budgets report, CIOT, the Institute for Government and the Institute for Fiscal Studies highlighted that once tax changes have been implemented, there is little scrutiny to hold government to account for the impacts of the policy. The report argued for effective and routine post-legislative review of whether measures are achieving their objectives at an acceptable cost, as well as for a reduction of Budget measure proliferation and a more strategic approach to tax policy making. This would lead to greater stability in the tax system and enable taxpayers – individuals and business – to make long-term decisions. The report specifically complained that there is no attempt to look at property taxation as part of a wider review of how to address the UK’s (or England’s) housing crisis.
Notes for editors
1. The CIOT’s submission can be found here.
2. Some of the main changes to SDLT post introduction in 2003 include: 2004 partnerships; 2005 Alternative property finance; 2006 substantial amends to partnerships; 2007 Section 75A and various including shared ownership leases, and sharia compliant mortgages, SDLT 60, zero carbon homes; 2008 Group relief (avoidance) changes and property investment partnerships (PIPs); 2009 collective enfranchisement, RSLs; 2010 changes to s 75A ( 3 x FAs that year); 2011 Multiple Dwellings Relief; 2012 Higher rate of 15 per cent; 2013 Subsales; 2014 Charities relief – Pollen; 2015 amendments to MDR and sharia; 2016 slab to slice and higher rates; 2017 No changes; and 2018 first time buyers
3. A Crown employee is someone who holds an office or employment under the Crown such as a member of the UK armed forces, a civil servant or a diplomat. It does not include all public servants such as doctors and nurses, who work for their local NHS Trust, or teachers who work for the Local Education Authority. Nor does it include employees of government agencies and non-departmental public bodies. See HMRC’s manual here.
4. Better Budgets - making tax policy better was a joint project by CIOT, Institute for Fiscal Studies and the Institute for Government.
5. Changes to SDLT in recent years:
the introduction in April 2016 of the three per cent higher rates of SDLT on additional dwellings.
the introduction of first time buyers’ relief at Autumn Budget 2017.
Those affecting specifically non-UK resident purchasers
the introduction in 2015 (and the extension in 2019) of non-resident capital gains tax.
the extension of the inheritance tax relevant property regime to non-UK companies owning residential property in 2017.
6. The Chartered Institute of Taxation (CIOT)
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.
The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.
The CIOT’s 18,400 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk