Property Tax / Stamp Duty interaction
18 June, 2009
Many people will make the reasonable assumption that if there is to be an annual property tax on residential property (and there certainly should be), then the current high rates of Stamp Duty on purchases of such property will be reduced at the same time. This highlights a potential transitional problem. In particular, unless there is some allowance made for stamp duty already paid (at least to the extent paid in recent years) when assessing liability to annual property tax, then the property market is likely to freeze up until the new regime comes in. Who will want effectively to pay property tax on the double?
What will be needed is some sort of offset. Perhaps stamp duty payments already made could be allowed as an offset against property tax liability for up to 5 years.
Less important than the precise mechanism is that the Government recognises that some announcement on the principle of an allowance is needed at an early date, to avoid a potential buyers’ strike. This assumes of course that stamp duty rates will in fact be reduced when the new tax is introduced.