It shouldn’t be a surprise to most people that HMRC have targets to hit when it comes to tax collection, targets which don’t change regardless of the many variables it is ultimately determined by.
In April 2018, HMRC’s data showed that house sales had dropped by 12.5% from the previous month, putting significant pressure on the tax take from stamp duty land tax (SDLT). The figures also revealed a 2% drop compared to April 2017.
With Stamp Duty (property taxes) accounting for 9%* of tax take for HMRC, they’re undoubtedly going to be attempting to recoup the lost amount by other means. There’s a likely chance that with less property transactions, HMRC will increase its activity in other areas, such as personal tax and SMEs in an attempt to make up the difference.
The property statistics don’t read particularly well for HMRC’s Stamp Duty team, with residential property transactions not exceeding 100,000 per month for the first quarter of 2018, a stark difference to the 106,000 – 118,000 it reached throughout the second half of 2017.
Lisa Wilson, Head of Tax at Cowgill Holloway commented on the impact: With the government continuing to target buy-to-let investors, those with second homes and the reduced relief available on mortgage interest rates, is it really a surprise that the number of property transactions are reducing?
“In economics the ‘Laffer Curve’ illustrates the negative effect that higher taxes can have on the tax take. The UK needs a more sensible approach on property tax policy. Many of our clients who previously invested in property are looking for alternative investments as they believe that they are being unfairly targeted. Property investment is not a benign activity, contrary to the Treasury’s view and those with large portfolios, held personally have suffered more change and greater taxes than any other taxpayers.
“With a lower tax take from SDLT, the danger is that the Treasury may look to other taxes to plug the gap to ensure the organisation as a whole still meets their target.”
With HMRC investigations continuing to rise, it’s essential to make sure your business is protected. Cowgill Holloway provide tax investigation service which covers the cost of your accountancy fees in relation to an investigation or enquiry. Visit our tax investigation microsite or contact Lisa Wilson on the form below.
*Source = https://www.ifs.org.uk/publications/9178
This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.