Business group wants Scots-style stamp duty reform

Accountancy group Menzies LLP is lobbying the government to announce the Introduction of a progressive Scottish-style stamp duty in the autumn statement on December 3.

The group wants this in a bid to avoid a mansion tax of the kind advocated by Ed Miliband's Labour party.

It would be good to see the introduction of a hybrid SDLT system with progressive rates up to £2 million and the highest charge for properties above £2 million. This would be fairer than the mansion tax because, being a transactions tax, it would not penalise people on limited incomes who have lived in a property all their lives explains Menzies director Stephen Hemmings.

He says a progressive tax system would not necessarily lead to a loss in revenue. Prices would rise around each threshold, increasing the tax take, and at the very top end of the market most of the value would remain at the highest rates. He says that in a growing housing market with no matching increase in banding thresholds, HMRC's tax take would increase.

The Scottish government has recently released proposals for the Land and Buildings Transaction Tax, which replaces SDLT north of the border, and is based on a progressive system. It has significantly increased the rates on higher-value property - with 10 per cent on property above £250,000 and 12 per cent on values over £1 million.

The current [stamp duty] tax regime operates on a cliff-edge basis at each price band. For example, if you buy a house for £250,000 you pay £2,500 SDLT, but if you pay only £1 more - £250,001 - then £7,500 is due. This distorts the market by creating clusters and oversupply below each price threshold and gaps above where there is a shortage of property says Hemmings.