An outspoken building society chief has taken the unusual step of calling for stamp duty to be replaced by capital gains tax on primary homes.
Jeremy Wood, chief executive of the Dudley Building Society, says SDLT in its current form is a major obstacle to the housing market functioning correctly, particularly for older people wishing to downsize.
He adds that it serves little purpose aside from being an income stream for government and ends up being a ”pernicious tax on mobility.”
Wood says the housing market is effectively at a standstill right now and that few consider the indirect costs to the public purse caused by people not moving house.
“A particular case in point is the number of older property owners, who are put off moving to smaller residences and freeing up ‘frozen’ capital, because they have to pay SDLT on a new purchase” he says.
“While releasing equity in one’s property is becoming very popular via equity release, many people either need to move because of advancing age and infirmity or because they want to release capital by downsizing, rather than by taking on another loan commitment via equity release.”
He adds:“There have been recommendations made recently, including the transfer of stamp duty payment to the seller rather than the buyer. But again, for those wishing to downsize, the SDLT effect would be magnified, rather than reduced.”
Wood says he has stamp duty has, according to some, because a stealth tax because the alternative - a capital gains tax on profits from a primary residence - would be politically unacceptable.
But he questions this, saying: “Perhaps, by abolishing SDLT altogether and creating that tax on sale, at least it would be a more transparent and, in the longer term, a more acceptable course of action?”
Wood’s comments follow a recent analysis by property investment consultancy London Central Portfolio showing a huge drop in stamp duty revenue going to the Treasury as a result of transaction volumes falling away.
LCP looked at transaction numbers and stamp duty payments across England, Wales and Northern Ireland, and discovered that in the first quarter of 2019 stamp duty receipts fell by 26.2 per cent just in three months.
They now stand at £1,757m, which represents a drop of £623m since the final three months of 2018.
Meanwhile transactions in England, Wales and Northern Ireland fell 21.4 per cent in Q1 2019 compared to the previous three months, and now stand at 237,240.