London Central Portfolio has carried out a detailed analysis of HMRC’s Annual Stamp Duty Statistics 2016-17, published on 30.09.17
Residential Stamp Duty receipts increased 17 per cent to £8,590 million in England and Wales due to the introduction of the three per cent
Additional Rate Stamp Duty (ARSD), charged on purchases of second properties
However, London’s take was up just one per cent to £3,410 million and Prime Central London (PCL) showed the biggest fall, down 10.3 per cent
As a result, PCL’s contribution to Stamp Duty tax take is down a massive 23.5 per cent
Transactions have also fallen by eight per cent in England and Wales
London saw the largest drop in transactions at 17 per cent, with falls across all price bands
The most notable fall was for property purchases in corporate wrappers, with a drop of 52 per cent in transactions and 58 per cent in Stamp Duty receipts
Whilst Stamp Duty receipts increased 17 per cent to £8,590 million in England and Wales, statistics from HMRC reveal that the graduated Stamp Duty system, coupled with the Additional Rate Stamp Duty (ARSD) on second purchases, has negatively impacted the London property market.
London saw receipts increase by only one per cent to £3,410 million and experienced the largest fall in residential transactions at 17 per cent. Transactions under £250,000 fell by 25 per cent, between £250,000 to £1 million by 13 per cent and over £1 million by 15 per cent. London also saw Stamp Duty tax receipts fall eight per cent above £1 million.
In Prime Central London (the City of Westminster and the Royal Borough of Kensington & Chelsea) receipts have fallen 10.3 per cent compared with last year. Whilst it continues to generate the largest contribution to Stamp Duty in the country, its overall contribution has fallen by 23.5 per cent, from 14 per cent to 10.7 per cent.
Naomi Heaton, CEO of London Central Portfolio, comments, ‘The new Stamp Duty regime has clearly had a significant impact on London. With the budget approaching, the government needs to carefully consider the fiscal damage of any future residential tax increases.
‘Whilst Stamp Duty take has been buoyed up in 2016-17 by the additional three per cent ARSD charge, now representing 40.7 per cent of all tax take in London, any new deterrent could tip the scales in the other direction. Despite political hyperbole, at 22 per cent of all transactions, London does not have disproportionately more ‘second’ properties, liable to the ARSD charge, than other parts of the UK. Reliance on ARSD to prop up a market where transactions have fallen 17 per cent year-on-year is a dangerous gamble.’
Whilst only briefly referred to, HMRC also report that tax take from properties purchased in corporate wrappers has taken a massive tumble. Buyers have been liable to a 15 per cent Stamp Duty charge, alongside paying an annual tax, the Annual Tax on Enveloped Dwellings (ATED), up to £218,000 per annum. Transactions fell 52 per cent and receipts plunged 58 per cent in 2016-17. With £178 million of ATED collected by the government in 2015-16, this decrease in corporate purchases could see a big tax reduction, not included in HMRC’s Stamp Duty statistics.
‘It is clear that the 15 per cent Stamp Duty charge, coupled with the penal ATED, has disincentivised new corporate purchases. Whilst the falling numbers of properties acquired in corporate wrappers is good news for the government, who has sought to deter such purchases, it is likely that the falling Stamp Duty revenues reported will be accompanied by a reduced level of tax collected from ATED when the results are published in January. This will be another black hole for the government to fill, whose options are diminishing as the residential market gets throttled,’ Heaton concludes.
Further reading on stamp duty
