Stamp Duty Land Tax Bill

Cheryl Gillan Excerpts

Monday 12th January 2015 Commons Chamber

[Mr Gauke]

All these matters are kept under review. My hon. Friend has been a consistent and doughty campaigner for reform in this area. If we had exactly the same system in place for commercial property, with the same thresholds and so on, we would be imposing a much greater burden on commercial property transactions, because by their nature they tend to be of a more substantial size. There is a higher level of consideration in place than for most residential property transactions. The argument for reform for residential property was particularly strong, which is why we took these steps. Consideration of whether there is a strong and persuasive case for reform for commercial property is perhaps a matter for another day.

[Mrs Cheryl Gillan (Chesham and Amersham) (Con)]

I join my hon. Friend the Member for St Albans (Mrs Main) in welcoming the provisions, which will provide a great deal of assistance to the housing market.

The Minister knows that for some time I have been pursuing stamp duty land tax for all those affected by the notorious HS2 infrastructure project. Is the Minister willing, while he is looking into this matter, to review those provisions? The SDLT relief applies to only a very narrow number of properties. To keep the property market operating normally, it should be possible to extend it to properties up and down the line that are being so adversely affected by the project.

[Mr Gauke]

I am grateful for that observation from my right hon. Friend and constituency neighbour. I know well how the issue of SDLT in general must be relevant to many of her constituents. On the specific point about HS2, the Government remain to be persuaded that SDLT is necessarily the right measure for addressing the concerns that she identifies and on which she provides an articulate voice in defence of her constituents and others affected by the project. We remain to be convinced, but I know that she will continue to make her argument, and we will continue to look at it carefully. As I said, however, we are not yet convinced that reform of SDLT, or an exemption or relief, would necessarily provide the right support for those with properties affected by HS2.

Clause 1 substitutes a new table A setting out the new tax rates and bands applying to a transaction consisting wholly of residential property and amends the calculation rules for these transactions so that each rate of tax applies only to that part of the consideration that falls within the relevant band. The total tax due is then the sum of the amounts for each band. The new calculation rules extend to linked transactions—those that form part of a scheme arrangement or a series of transactions between the same buyer and seller. In this case, SDLT applies to the aggregate consideration for all the linked transactions.

The new rules do not apply to transactions to which table B in section 55 of the 2003 Act applies—transactions or linked transactions consisting wholly of non-residential or a mixture of residential and non-residential property. The clause introduces the schedule, which makes consequential amendments to SDLT legislation to take account of the reform. The main changes are to the method of calculating the tax due under certain SDLT reliefs. The first relief is for statutory leasehold enfranchisement, where leaseholders of flats club together to buy the freehold of their block. This relief formerly operated by setting the rate of SDLT according to the amount paid for the freehold, divided by the number of qualifying flats. Under the new arrangements, first we divide the amount paid for the freehold by the number of qualifying flats and calculate the amount of tax due on that sum. We then multiply that amount of tax by the number of qualifying flats in order to arrive at the total tax due.

Secondly, a similar change is made to relief for purchasers of multiple crofts from a landlord by a crofting community body under the crofting community right to buy scheme. This relief only applies in Scotland so will only be relevant until 1 April 2015, when SDLT in Scotland is replaced by the devolved land and buildings transaction tax.

Finally, a similar change is made to multiple dwellings relief, which applies to purchasers of more than one dwelling in either a single transaction or linked transactions. This relief was previously subject to a minimum rate of 1%. Under the new rules, the amount will be equivalent to 1% of the chargeable consideration given for the dwellings, which in practice gives the same result.

Right hon. and hon. Members raised several important points on Second Reading. I would like to take this opportunity to explain in a little more detail the Government’s position on some of those issues. First, it has been asked why we have chosen not to apply the new rules to non-residential—commercial and agricultural —property as well as to residential property. That point was raised just now by my hon. Friend the Member for St Albans (Mrs Main). As I said, the market for non-residential property is very different from the market for residential property. For example, non-residential properties have a higher value on average and many are held on market rent leases granted for a small or no premium. At this time, the Government do not feel it appropriate to make changes to non-residential SDLT, although all taxes are kept under review as part of the policy making process. Any change to non-residential SDLT would have to be considered very carefully.

Some concern has been expressed about the possibility of purchasers avoiding SDLT by designating the property as either residential or non-residential in order to obtain a more favourable result. What constitutes residential property is set out in the legislation. Property can be either residential or non-residential, which is a matter of fact. There is no option, as it is has been suggested there is, to flip property between one and the other. I can reassure the Committee on that.

Finally, it has been suggested that the highest rate of tax payable under the new rules might reduce the disincentive to envelope residential property provided by the 15% higher rate SDLT charge, which applies to purchasers of residential property by a company or other non-natural person. The highest marginal rate of SDLT for the purchase of residential properties above £1.5 million is now 12%. However, SDLT is charged at 15% on the whole value for residential properties bought through corporate envelopes for more than £500,000. We are not proposing to make any changes to the 15% higher rate charge. However, in the autumn statement, we announced that the annual charges of the annual tax on envelope dwellings—ATED—would increase by 50% above inflation for the chargeable period 1 April 2015 to 31 March 2016 in order further to discourage the use of enveloping. The Government keep all taxes under review where individuals continue to hold property within corporate wrappers. They should be prepared to pay their fair share of tax.

These reforms to SDLT will remove the previous economic distortions in the system, benefiting the housing market and improving the fairness and efficiency of the tax system. They will give another boost to people looking to fulfil their aspirations of owning the place they live in and will make a real tangible and positive difference to the lives of people up and down the country.