Putting homes into companies to avoid stamp duty is ‘completely unacceptable’ and the government is ‘going to come down on that practice like a ton of bricks’, the Chancellor warned in a TV interview yesterday. Few tax experts will be surprised – many have been expecting anti-avoidance legislation for years.
The BBC’s Andrew Marr suggested that ‘the whole question of tax loopholes is angering people, perhaps more than it’s ever done’. The Sunday Times had reported that rock stars ‘including Sir Mick Jagger and Bob Geldof’ were among the wealthy who had put ‘almost 100,000 properties worth an estimated £200bn’ into offshore companies. ‘The practice is denying the country more than £1bn a year in lost tax, including millions in stamp duty,’ the paper suggested.
George Osborne told Marr that Wednesday’s Budget would contain measures to counter stamp duty land tax avoidance: ‘Rich people, often foreigners who come to this country, but also some people here in Britain, who put homes into companies to avoid stamp duty – that is completely unacceptable.’
‘We are going to come down on that practice like a ton of bricks. We are coming after that tax avoidance,’ he said.
‘We are going to be extremely aggressive in dealing with it. People are going to face a very punitive charge because it is completely unacceptable when you’re buying a home that you’re going to live in ... We are going to have new measures in the Budget on this ... People have had their warning, they have got to pay stamp duty on the homes they live in and we’re going to deal with that in a very aggressive way.’
According to The Sunday Times, the Land Registry calculated that in ‘the past 12 years a total of 94,760 properties have effectively been placed offshore and beyond the reach of the taxman’.
Nick Pearce, the Director of the Institute for Public Policy Research, said last week that action to tackle ‘the anomalous treatment of foreign buyers of UK property’ would be long overdue. ‘Foreign purchases of London properties have reached such proportions that the capital’s prime properties have become a kind of global reserve currency for the wealthy elite of capital-rich countries,’ he wrote.
Patrick Cannon, a tax barrister (pictured), wrote last December in Tax Journal that ‘it would be surprising if HMRC was not revisiting plans shelved in 2003 to introduce SDLT on the sale of the shares in property-owning special purpose companies’.
In December 2010 he said it was ‘a curious situation’ that allowed expensive homes held within such companies to be bought free of SDLT. It was, he added, ‘on a par with the increasingly outdated exemption for non-resident investors from capital gains tax on UK property’.
Income tax rates
Osborne said the major measures to be set out in the Budget ‘were decided a week ago’. It was ‘absolutely fine’ in a coalition for people to argue their corner, he said, and ‘perfectly reasonable’ for supporters of the political parties to be ‘stressing what they want to stress’ in the run- up to the Budget. At the top of government, however, the coalition was ‘working to produce a coalition Budget’.
He said the government wanted to see ‘real and substantial progress on lifting low-income people out of tax and helping working families’. He had seen HMRC’s assessment of the impact of the 50% rate of income tax but declined to say ahead of the Budget whether he thought the rate had been ‘effective’.
MPs will debate the Budget on Thursday 22 March, Friday 23 March and Monday 26 March. The Finance Bill will be published on Thursday, 29 March.
