Saltus: Stamp duty needs overhaul and CGT changes fall short
Following a report from the Office of Tax Simplification (OTS) on Capital Gains Tax (CGT) which suggested an extension of the payment deadline to 60 days, Michael Stimpson, partner at Saltus has also called for rates to be reconsidered.
Stimpson said: “The majority of commentators were anticipating a CGT rate rise and a reduction in the annual allowance to be announced in the spring budget.
“They were pleasantly surprised when [Chancellor Rishi Sunak] simply announced a freezing of the annual allowance at £12,300.
“However, he failed to even touch on rates themselves, shrewdly leaving the door open for future rate rises.
“Between 1980 and 2008 rates have either been set at 30% or aligned with income tax.
“Today they are at historically low levels (10% and 20%) – an increase in rates will simply be a return to the norm and will be an obvious route for [Sunak] to re-fill the coffers.
“Clients would wise to bear this in mind when considering whether to hold onto assets with heavily impregnated gains.”
Stimpson has also called for a series of changes in order to update stamp duty.
He said: “Stamp duty has been in need of an overhaul for decades.
“The tax was introduced to pay for the 100 Years War in the early 18th Century, and it feels as if it’s a piece of legislation that has remained firmly in the 18th Century.
“The tax has failed to keep up with rising property prices and contributes to reduced transactions, as well as acting as a significant hurdle for first-time buyers.
“Property transactions lead to VAT take for the treasury and direct economic support for tradesman, retail companies, estate agencies and the like.
“As such, I’ve been in favour of a significant raising of stamp duty rates for some time.
“However, I would simply be in favour of a raised rate to a threshold of £1m and expect the resultant VAT take to balance the books with no replacement wealth tax.
“A wealth tax is a model that has historically proven to push wealthier individuals out of the country in question and raise limited revenue.
“There were around 12 countries in Europe in the 90s that operated a wealth tax and now there are only three (France, Spain and Portugal).
“It’s generally a failed model and, for me, is not an obvious route out of the pandemic.”