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Not such dire straits – Can HMRC learn from Singapore’s Dyson property taxes?

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Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

‘Wealthy man buys house’

At one time, ‘Wealthy man buys house’ was not necessarily the kind of story to leave our national newspapers in a lather.

However, the growing fascination with celebrities in recent decades has meant that newsdesks now sit up and take notice about the contents of conversations between the super-rich and their estate agents.

When the individual in question is a Brexit-supporting billionaire who has snapped up not one but two luxury properties in Singapore – the country to which he has relocated his company’s headquarters – a page-lead might be thought justified.

Sir James Dyson’s decision to pay a reported £26.5 million for a bungalow with “commanding views” of Singapore’s Botanic Gardens earned a fevered write-up in the Sunday Times.

The story was made even more gushing by the revelation that the purchase followed Sir James’ wrapping up a £43.5 million deal to buy a “super-penthouse”.

Second Singaporean property

Having torn myself away from the details of infinity pools, jacuzzis and a 600-bottle wine cellar, one editorial nugget caught my attention.

Given that Sir James’ bungalow is his second Singaporean acquisition, it will carry with it a multi-million Stamp Duty bill. The island city-state imposes a 15 per cent charge on additional homes.

At first glance, it is a gesture which has possible echoes of the UK Government’s attempts to extract more cash from the purchase of expensive properties, especially the sort which have tended to be snapped up by foreign nationals.

Yet looking a little deeper, I have found myself wondering why the Inland Revenue Authority of Singapore seems to be having more Stamp Duty success than its British equivalent, HMRC.

In the space of 12 months, the Authority has seen its receipts of the tax increase by a staggering 49.6 per cent to £2.93 billion.

Furthermore, according to the Commission of Inland Revenue, Stamp Duty makes up 10 per cent of Singapore’s tax income.

HMRC’s falling stamp revenues

Bear that in mind when analysing at the situation faced by his HMRC counterpart.

Its most recent annual report, published just last month, has revealed that the amount contributed to the Treasury by Stamp Duty Land Tax (SDLT) – which accounts for less than two per cent of the £627.9 billion paid in the UK in tax – actually fell by £1 billion during the 2018-19 financial year.

The bad news for the Revenue may not all be historic either. Consider the very latest figures, which demonstrate a 5.7 per cent drop in residential SDLT in the second quarter of this year compared to the numbers for the same period in 2018.

Things are even more acute when you examine homes worth more than £1 million from which – as I’ve remarked on before on this ‘blog – successive governments have tried to squeeze increasing sums in SDLT.

The sale of such residences has fallen by 12.2 per cent in just 12 months – almost four times the size of the reduction in house purchases overall.

That naturally gives rise to the question about whether the UK’s incremental ratcheting up of SDLT has stunted rather than swollen receipts and specifically those generated as a result of the sales of expensive homes.

It was George Osborne you may recall who, in December 2014, decided to move from the “slab” system of calculating SDLT (ie, one rate for the whole of a property’s value) to a “slice basis”, with gradually higher rates applied to that part of a home’s price which fell into one of a number of SDLT bands above the nil rate threshold of £125,000.

The move particularly affected those people able to afford properties worth more than £937,000.

In the following year’s Budget, he went one step further, announcing a three per cent SDLT surcharge for additional residential properties.

Theresa May’s big SDLT idea

Facing the ire of campaigners who argued that some people were still being priced out of the housing market, Theresa May used a speech at last year’s Conservative Party Conference to propose the levying of a one per cent charge on all residential property bought by non-UK residents.

Whether it will ever take effect is another matter, though, as a three-month consultation on the issue closed just weeks before Mrs May resigned as Prime Minister.

Such initiatives may, of course, satisfy a peculiar national agenda at a time when the unresolved Brexit underlines how pro-British sentiments resonate with the country’s electorate.

Nevertheless, if tinkering with SDLT deters wealthy foreign nationals from setting up home and possibly business in the UK, one can maintain that benefits neither tax income from the property market or the wider economy – something which may be critically important if withdrawal from the EU ever comes to pass.

Singapore’s performance on Stamp Duty could, on the other hand, be regarded as a sign that it’s doing something very right.

Boris Johnson may have promised to overhaul the UK’s system yet again but the Treasury’s prevailing approach suggests that it may well be some time before the UK is able to vacuum up SDLT cash in the same way as its peers in certain prosperous parts of South East Asia.

 

If you have any comments or queries on this article or would like any assistance with your tax affairs then please don’t hesitate to get in touch.

 

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