NAEA former President chases down answers to SDLT and CGT proposals

by Property 118

A week ago

NAEA former President chases down answers to SDLT and CGT proposals

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NAEA former President chases down answers to SDLT and CGT proposals

The former President of the National Association of Estate Agents (NAEA), Simon Gerrard, has sent another open letter to Housing Minister, Alok Sharma, chasing for a response to his housing market proposals.

The first letter was ignored by the Housing Ministry and just passed on to the Treasury receiving a cursory reply. The plans given for consideration were outlined as:

  • Switching stamp duty liability from buyers to sellers.
  • To have a moratorium on Capital Gains Tax.

Estate Agent today and Simon Gerrard are now demanding a formal response in an open letter to the Treasury and the Chancellor, Phillip Hammond.

Click here to see Estate Agent Today article.

Below is the open letter and its arguments:

Many thanks for taking the time to respond to my letter that I wrote to our Housing Minister Mr Sharma, in which I outlined two key policies that I, and much of the industry, believe could be transformative in solving many of the problems currently plaguing our housing market.

However, what is clear from your response is that you have failed to properly consider or grasp either of the suggested measures. I am concerned that you do not understand my intended approach to support the housing market, which you claim to be so invested in fixing, so I thought I would elaborate in the hope of engaging with you.

I appreciate that supplying the number of homes needed, and supporting home ownership, is a complex and difficult task that requires the securing of significant funds by the treasury.

However, it is for this reason that the two measures suggested are intended to stimulate activity and encourage healthy market activity without drawing on extensive funds or reducing the overall amount received by the government through taxation. Increased transactional volumes would both boost treasury income and ensure that the property industry continues to act as one of the key pillars of our economy. It is short sighted of you to assume that the positive impact to the economy of increased transactional volumes is limited to stamp duty receipts.

Following receipt of your letter I have also consulted with the Association of Accounting Technicians, to ensure a robust analysis of the available data.

I will first address your feedback regarding my suggestion of switching SDLT liability from the buyer to the seller. This will undoubtedly help first-time buyers get on the ladder (AAT found that the number of first-time buyers paying stamp duty rose over 96% from 2013-2016). It would also assist second steppers, and therefore increase the number of property transactions taking place. You claim that there would be a ‘short to medium term’ loss of revenue and that transitional arrangements would be needed to deal with homeowners facing double taxation. However the fact is that while those paying Stamp Duty will change, the amount will not. The only transitional issue would relate to those obtaining bridging finance to complete a purchase before selling, and there are already transitional arrangements in place in this regard with respect to the 3% additional second home liability. Stamp Duty will remain a multi-billion pound revenue stream. Considering the benefit of an increase in transactions and a greater number of people able to get on the property ladder, this ‘short to medium’ cost of arranging the switch will pay dividends in the long term and is surely worth the limited short-term cost.

In addition I have suggested that this does not apply to those buying second homes, who will continue to pay the 3% second home surcharge at purchase, but rather only those buying first or subsequent family homes that will pay no stamp duty on their purchases. You argue that this will stop people selling – however this happens anyway and has nothing to do with cost, but rather sentimentality. When examining the property chain, downsizers are likely to have minimal mortgage costs and significant equity, therefore are best placed to pay a little extra – certainly more than first time buyers. The London School of Economics and the VATT Institute for Economic Research have said that moving home would increase 27% if the levy was scrapped (August 2017).

The only reason that this change may have a detrimental effect on government income is because of my suggestion that those building new homes would not have to pay when selling, to ensure that house building is still encouraged. I also believe that those over pensionable age with less than £250,000 equity when they sell should not pay stamp duty on their sale. This would protect those with less equity in property and ensure they are still able to afford care in their later years as needed.

Secondly is my suggestion that the Government undertake a temporary CGT moratorium on land sales. This would provide landowners with a much needed push to sell, and bring a huge amount of land to market, allowing desperately needed homes to be built. Your only response was that CGT raises several billion pounds each year and any change would have to be carefully considered. However I was not suggesting a total moratorium on all CGT – only where it relates to the sale of land for development. I would like to ask exactly how much this revenue amounts to? I imagine it is in the realm of hundreds of thousands of pounds, rather than billions. This amount would be far outweighed by the positive impact of multiple new developable plots of land coming to market and enabling much needed homes to be built.

Finally, you mention the ‘significant progress’ that has been made in boosting house supply, with almost 900,000 homes built since 2010. Yet this breaks down to less than 128,000 homes per year – well below the 300,000 target your Government set as the level needed to meet demand. If my team were only hitting 40% of their target, I would not be declaring it a success, but rather looking into drastic measures on how to bring that up to speed. Simply put, it is not enough.

I am also very disappointed that Mr Sharma did not feel that my letter warranted a direct reply, and that he appears to be hiding or altogether disinterested in the housing market. As you are aware I am past-President of the National Association of Estate Agents (NAEA Propertymark), and am more than aware of the market dynamics that have governed the industry for the last two decades. He should be taking the time to consider such measures, not avoiding engagement altogether.

Your letter, while well-intentioned, shows a failure to adequately grasp and consider my policy suggestions. I intend to share my original letter, your response, and this letter with both the Chancellor of the Exchequer, Mr Phillip Hammond, and the Secretary of State for Communities and Local Government, Mr Sajid Javid.

I would welcome the chance to discuss this matter in person, as a means of ensuring you understand the policy suggestions and their positive potential impact on the property market. I would also welcome the opportunity to discuss any unintended consequences that you, your team or the Government feel that I may have overlooked.

I look forward to hearing your thoughts.

Yours sincerely,

Mr Simon Gerrard

MD, Martyn Gerrard Estate Agents”

Comments

terry sullivan

A week ago

abolish all stamp duty and abolish most of govt

David Price

A week ago

I regret that I feel this is tinkering around with the system and making transactions more complicated. We have all paid tax on the money we earn, further tax on an essential like housing should not be necessary, it would be preferable to increase income tax.
The housing market is only problematical because of lack of investment and government interference (right to buy - sorry Margaret but I think this was a ill conceived policy - and help to buy).

Now I must go and arrange a few deckchairs . . .

David Price

A week ago

Reply to the comment left by terry sullivan at 13/11/2017 - 12:43
We do not need to abolish this government, they are doing a splendid job all by themselves.

Fiona Stacey

A week ago

I personally think that Property118 should not be printing this 'idea' about transferring Stamp duty to the seller, and giving it publicity. With many landlords now desperately trying to exit the market as a result of the increased tax burden placed by section 24 etc, we cannot cope with any more uncertainty about what we are going to have to pay. It's different for the buyer, who has a choice to enter into the purchase or not, depending on the current taxation environment. But to impose a tax on a seller who has no choice in the matter and no way out, is a horrendous idea. The thing is that I would not put it past the Government (or a future Government) to charge us stamp duty a second time on the difference or something like that. They have imposed retroactive changes before. The problem in recent years has been constant 'moving of the goal posts' with regard to landlord taxation. How are we supposed to run a business like this. They just need to build more properties - THAT'S ALL.

Sue Twyford

A week ago

What a pompous twerp is Mr Gerrard! I'm inclined to agree with the sentiments expressed by Fiona. Gerrard refutes the argument "this will stop people selling – however this happens anyway and has nothing to do with cost, but rather sentimentality" - what nonsense, and ramping up the cost of selling won't stimulate owners to sell. Switching the stamp duty to seller will put people off, and for landlords it will also sit alongside our swingeing 28% capital gains tax! Not exactly an enticing proposition!

Ian Narbeth

A week ago

It has been said that "the Seller pays the SDLT anyway". Which is not to falsely claim that sellers have to send money to HMRC but rather that the price received takes into account the SDLT that has to be paid. If buyers don't have to pay SDLT then sellers are likely to ask a little more.
I don't think it is helpful to insult Simon Gerrard. He is making a point. He may be right or wrong but he has put forward a reasoned argument.

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