Property tax plans criticised

Plans to levy a tax on property owners who sell their homes have been severely criticised by tax specialists. The proposal, which would effectively mean stamp duty on house sales as well as purchases, came from an economist at the Department of Health and is being looked at by the Prime Minister’s strategy unit. However, Downing Street itself seems less keen on the idea.

The suggested tax would rise for each year the seller owned the property. This is designed to encourage people to move to where jobs are available and could, in theory, correct the imbalance of house prices between the South East and the North of the country. However, accountant PKF believes such tinkering could cause a ‘full-blown crash’ in the property market.

PKF points out that the last time serious changes were made to the tax regime surrounding houses was in the late 1980s, during the previous property boom. The Government in 1988 ended the double MIRAS allowance for people co-habiting. The effective halving of this mortgage relief on many households contributed in a major way to the subsequent property price collapses.

The average price of UK property fell 9 per cent between 1989 and 1994 to £62,750, according to statistics from leading building society HBOS.

Peter Penneycard, PKF tax director, commented ‘Recent reports that a stamp duty on house sales was under consideration may have been rejected by the Government at the moment but it is unlikely to have been ruled out indefinitely. Such a move would have a devastating effect on the property market and consumers should be on guard.’

29/07/02