RICS calls for radical reform
The UK's stamp duty land tax (SDLT) is unfair to people on lower incomes, penalises first time buyers and is in urgent need of reform, says RICS today (6 March 2006). 

Publishing an alternative proposal that would remove market distortions, help more first time buyers and maintain revenue neutrality for HM Treasury, RICS is calling on the Government to overhaul the oldest tax administered by HM Revenue and Customs.

95% of chartered surveyor estate agents believe SDLT is in urgent need of review. 

Their concerns centre around the ‘slab’ approach of the tax where, under the current taxation structure, homebuyers who purchase a property priced between £120 000 and £250 000 are eligible to pay 1% of the value of that property in SDLT. 

Properties between £250 000 and £500 000 pay 3% of the property value and for properties bought over £500 000 SDLT of 4% of the property value is incurred. 

RICS members agree that this has caused house price clustering, tax avoidance, impeded mobility and problems for first time buyers.

The 0% band for this tax is £1-£120 000 whilst the average UK house price is £185 788.

Upfront costs are a major issue for first time buyers, resulting in many remaining in the rental market.  RICS members recently reported the biggest increase in tenant demand in nearly five years.

RICS is therefore proposing that:

• SDLT be changed to a marginal system, like income tax, where the tax take is a levy on the amount above a certain level, not the total transaction value.  This would remove the distortions that the slab system produces, particularly at the major pinch points of £250 000 and £500 000
  
• the bottom threshold be raised to £150 000 in order to help first-time buyers onto the housing ladder.  Raising the 0% level by £30 000 would remove a further 17%of all transactions from SDLT, resulting in nearly 50% of house purchases falling outside the tax.
  
• that a marginal rate of 5.5% be applied maintaining revenue neutrality.  Under this system most people buying homes (costing less than £1m) would pay less, whilst the majority of those buying property above £1m would pay more.

RICS chief executive Louis Armstrong:

"Our proposed system would be fairer for the house-buying public, ensuring that those who can pay, do pay.  It would create more movement in the property market, and it would be revenue- neutral, which should appeal to the Government.

"The long-term gain for people buying and selling their homes would be well worth any temporary market turbulence. 

"Whilst there would be some who would pay more under our proposal, this is primarily as a result of the inherent flaws of the existing 'slab' system, that unfairly and artificially protects a particular group. 

"Overall, nearly 50% of house transactions would be removed from this tax, without a fall in revenue.  At present the 'slab' approach has the potential to affect around 65% of home buyers."

Chairman of the RICS Residential faculty, Jeremy Leaf:

"It’s not just homebuyers who resent the current tax structure.  Estate agents firmly believe it should be changed.  The structure of stamp duty is antique – this tax needs to catch up with the property market and house prices."