If a letter from the Financial Secretary to the Treasury is anything to go by, the government seems bent on implementing the 3 percent stamp duty surcharge on April 1, no matter the outcome of the ongoing consultation exercise.
The letter was in response to comments sent to the Office of the Prime Minister, David Cameron, by Andrew Goldthorpe – chief executive of PropertyMutual.co.uk, and owner and managing director of PropertyPortal.com – a constituent of the Prime Minister’s Witney constituency.
The comments contained concerns raised by readers of Estate Agent Today and Letting Agent Today.
The Prime Minister’s office duly forwarded the comments, with a covering mail from Goldthorpe, to David Gauke MP, Financial Secretary to the Treasury.
Goldthorpe expressed concern over the unusual timing of the consultation – starting between the Christmas and New Year break and having a shorter duration than usual – which does not seem to meet even the government’s own guidelines.
“The proposals are fundamental in challenging the buy to let model and they risk reducing the private rental stock in particular. I’m also extremely concerned that the consultation period over the recent stamp duty surcharge is so short,” says Goldthorpe.
Gauke’s reply, reproduced below, contains a telling sentence in the fifth paragraph which seems to indicate the government’s resolve to effect implementation of the April 1 surcharge, irrespective of the outcome of the ongoing formal consultation.
The fifth paragraph, with the key sentence in bold, reads: “In his email, your constituent expresses his concern that the consultation period is too short and that the consultation document was published over the Christmas break. I would like to reassure your constituent that the consultation process is full and open and that his and other respondents’ views will be taken into account. The consultation period is shorter than 12 weeks so that my officials have time to properly analyse the responses we receive so the final policy design can be confirmed and come into force by 1 April.”
This response has prompted Goldthorpe to conclude that the government has no intention to leave room for any significant changes to its plans, whatever the outcome of the consultations.
“In other words, it appears to me that the government never had any intention of allowing the consultation to meet their own recommendations, and intended to disregard objections as this legislation was always going to be pushed through by 1st April”, says Goldthorpe.
Here is the full text of Gauke’s reply:
“Dear Prime Minister,
“Thank you for your letter of 20 January enclosing correspondence from your constituent Mr Andrew Goldthorpe … about the changes to Stamp Duty Land Tax (SDLT) announced at the Spending Review and Autumn Statement 2015.
“From 1 April 2016 higher rates of SDLT will be charged on purchases of additional residential properties, such as second homes and buy to let properties. The higher rates will be three percentage points above the current SDLT rates. This is part of the government’s commitment to supporting home ownership and first time buyers.
“It is right that people should be free to purchase a second home or invest in a buy to let property. However, the government is aware that this can impact on other people’s ability to get on to the property ladder. This policy is not expected to have an effect on rent levels and it is worth noting that SDLT is only paid once, when a property is purchased.
“The government does not intend for higher rates of SDLT to apply to those making significant investments in residential property given the role of this investment in supporting the government’s housing agenda. The government is currently consulting on whether an exemption for purchasers making significant investments in residential property is justified in some circumstances and how it can best be formulated.
“In his email, your constituent expresses his concern that the consultation period is too short and that the consultation document was published over the Christmas break. I would like to reassure your constituent that the consultation process is full and open and that his and other respondents’ views will be taken into account. The consultation period is shorter than 12 weeks so that my officials have time to properly analyse the responses we receive so the final policy design can be confirmed and come into force by 1 April.
“The consultation is currently open and available online and I would welcome any further views your constituent has as part of this. Responses may be sent to: firstname.lastname@example.org.
“Please pass on my thanks to Mr Goldthorpe for taking the trouble to make us aware of these concerns. I hope this reply has been helpful.
“Yours ever, David Gauke.”
Stakeholders’ reactions to new policy
Since the announcement of the tax changes, concerns have been raised by landlords, mortgage brokers and lenders, and other UK property stakeholders over the wisdom of the new policies.
The government had revealed that it plans to fund the budget of its affordable housing projects with revenue generated from the extra stamp duty tax, especially for areas that are most hit by the impact of second home ownership.
But this reasoning has been challenged by experts. “The chancellor said that this government would tax the things it wants to reduce not the things it wants to encourage,” says Richard Lambert, chief executive of the National Landlords Association (NLA). “On that basis, it’s clear he does not regard ordinary people putting their own money into providing homes as worthwhile. The steady upward ratchet of taxation on landlords over the past year shows that George Osborne is determined to bear down on the private rented sector. But he still depends on the tax revenues he expects to pull in from them.”
Experts in the industry say that despite the government’s best intentions, the new fiscal policies will have far reaching consequences on the UK society.
It is estimated that apart from landlords and second homeowners, letting agents, mortgage lenders and brokers, estate agents and new-build developers whose businesses depend on these investments will be seriously affected.
The expected reduction of buy-to-rent investment may also adversely affect households who depend on the UK private rented sector for their housing. There may not be enough homes to rent, and buy-to-rent investors are likely to increase rent to cushion increased costs.
The UK government’s stance
The government has long maintained that the extra stamp duty tax is one of several new policies aimed at providing homes for first-time buyers and providing greater stability to the economy.
The extra stamp duty surcharge is part of a larger scheme tagged the Five Point Plan aimed at supplying housing and supporting low-cost home ownership.
The Five Point Plan includes:
- delivering 400,000 affordable housing starting by 2020/21
- extending the Right to Buy to Housing Association tenants
- accelerating housing supply
- extending the Help to Buy and introducing a London Help to Buy scheme
- introducing higher rates of stamp duty land tax
According to the government, the 3 percent extra stamp duty tax, with other property tax reforms, will ultimately discourage buy-to-let property investors, thereby making more homes available in the market and by extension, making home ownership more affordable for first-time buyers.
Broader Economic Implications
The government has also cited broader economic considerations as part of the reasons for introducing measures to discourage buy-to-rent investment.
The Bank of England’s Financial Policy Committee expressed concerns over the behavior of banks and building societies in their efforts to secure customers. Mortgage lenders are known to ease their already loose lending rules to beat competition.
According to the Bank, buy-to-let borrowers would therefore be very vulnerable to the effects of significant changes in interest rates and tax policies, which may lead to an economic crisis.
According to the Council of Mortgage Lenders, buy-to-let mortgage outstanding balances reached more than £200 billion in late 2015.
The UK government has stated that it will consider all responses to the introduction of the extra stamp duty tax before confirming the final policy on March 16. The government also revealed plans to consult with a wide range of stakeholders, holding meetings with them “to gather views on specific issues.”
Source Website: The House Shop
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