After nearly three years of the increased residential Stamp Duty Land Tax (SDLT) rates and almost a year of the SDLT surcharge for additional properties, developers are mounting a call for reform. How successful can this be opposite a government under economic pressure?
Like most taxes, SDLT is unpopular. It is a complicated system open to challenge and is particularly difficult for homeowners struggling to afford ever increasing housing prices.
Developers and investors are also frustrated by the system particularly after the changes introduced in 2014-2016. These saw rates jump from 5% to 10% for properties over £925,000 and an additional 3% levy for additional property purchases (not to mention the flat rate of 15% where companies acquire residential property over a value of £500,000).
It seems that, having so far tolerated these changes, major property developers and housebuilders are fighting back by preparing research they hope will prove to the Chancellor that SDLT needs to be reduced as part of the autumn budget.
Developers argue that SDLT is one of the major factors in deterring development – particularly for those operating in London and the South East where property values are increasingly exceeding £925,000.
Whilst the position of developers is understandable (it is clear that the increases at the higher end will represent a significant and off-putting additional cost for buyers) it is also hard to see how they will convince the Government to change the regime.
The purpose of the changes in 2014 was to encourage buyers at the lower end of the market by reducing the amount of SDLT that was payable – funded by increasing the amount of SDLT payable at the higher end. A change to reverse this would be unpopular with the general public who would see the wealthier minority benefitting at the cost of the poorer majority.
In addition, it is clear that the changes to the regime have financially benefitted the Government – figures from HM Treasury show that SDLT revenues for 2016-17 are anticipated to reach £8.3bn, £1.4bn of which will be funded through the 3% surcharge.
This is forecasted by the Office of Budget Responsibility to increase to £13.1bn, £2bn of which will be funded through the 3% surcharge by 2021-22.
Developers will likely argue that this financial windfall can be achieved by building more stock to generate SDLT through volume rather than high rates, however despite repeated assurances that the Government is looking to increase and speed up the delivery of new homes through changes to the planning system, it is hard to see what incentive there is for the Government to gamble on developers building more stock particularly when coupled with the fact that the current regime is already generating a solid and steady income.
It will be interesting to see what research the housebuilder and developer group provide, but it is clear that they have an uphill battle on their hands and probably the hardest sell they will ever face.