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Stamp Duty proposals could be ‘overkill’

Written by: Hannah Uttley
The Council of Mortgage Lenders (CML) has urged the government to reconsider its proposals to implement a 3% Stamp Duty levy on second homes, which will include buy-to-let purchases.

Responding to HM Treasury’s consultation, the CML said that even without the new surcharge the market is likely to slow down, with landlords to be subject to a lower rate of mortgage interest relief from 2017. The Bank of England is also keeping a close eye on the sector with macroprudential intervention a possibility.

The CML said the government risked ‘overkill’ in attempting to stifle investor appetite in the sector, which could result in the flow of available privately rented properties being disrupted.

Proposed changes to the way in which landlords receive tax treatment were announced last year by the Chancellor in a bid to create ‘a nation of homeowners’.

However, the CML said there was a ‘perverse risk’ that the Stamp Duty increase could cause landlords to charge higher rents, in turn making it more difficult for tenants to save a deposit for a home of their own.

In its consultation, the government suggests that a refund mechanism for the Stamp Duty levy should be available for individuals who purchase a second property and go on to sell their original home within 18 months. But the CML said it would be ‘fairer and more efficient’ for buyers to be able to defer their payment of Stamp Duty for 18 months subject to conditions, rather than paying the 3% premium up front.

It has also urged the government to clarify whether its policy intention is to favour institutions facilitating new-build activity, or new-build activity more generally. The CML said if the policy focus is on the perceived economic gains from the sector, it should recognise the potential for small-scale and individual investors to contribute through off-plan purchases.

CML director general Paul Smee (pictured), said Stamp Duty was being used as ‘a blunt policy lever’.

“Given the complexity of the proposals, we also suspect that in practical terms the surcharge could cause more problems than it solves. We urge the government at least to move away from a position where people will have to pay and then potentially claim back to one where payment is deferred, and only triggered if the buyer genuinely falls into the intended target category,” he added.

“If the surcharge proposal is designed to promote home ownership, we think that there should be better evidence as to why this requires a reversal of growth in the private rented sector.”

The government’s consultation closes to responses on Monday 1 February. For a summary of the main points, read our round-up of the key highlights and issues in the consultation.

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