The SDLT changes have not addressed fundamental issues:
The thresholds create artificial barriers to rational pricing and are avoided, or rather 'evaded' by owners doing deals with buyers to purchase just below the threshold but with additional sums being paid for fixtures and fittings etc.
SDLT should have progressive 'thresholds' which would work similarly to the way income tax works. i.e. one pays the higher rates only on the part of the purchase price above each threshold. It would be fairer, impact less on the lower end of the scale, have a neutral impact on mid, upper-mid range property and collect more from those who can afford it. Crucially, it would do away with 'cliff-edge' thresholds which encourage avoidance.
The 15% SDLT charge on 'non-natural persons' using a corporate structure has been introduced as a sop to the Liberal coalition partners in order to push through the reduction in top rate income tax. Poorly researched, it is assumed that individuals who purchase property via a corporate structure swap them around amongst each other thus avoiding SDLT at the upper rate. This is not the case.
High Net Worth individuals have always bought via a corporate vehicle for the purposes of anonymity and other reasons unconnected with SDLT. When they buy a residential property they pay SDLT at the prevailing rate. When they sell the property, which may well be sold to a similarly minded individual, they will not, in most cases, simply sell the shares in the company holding the property thus avoiding SDLT liability. The purchaser will create a corporate structure of their own, in a domain of their choice, delivered by their own advisors which they can rely upon and buy the asset alone. This means they pay SDLT at the prevailing rate.
The annual charge is a ridiculous attempt to recover ill-assumed losses in revenue once the property has entered a corporate structure and is ‘lost forever’, beyond the reach of SDLT until the end of time. This is a ‘non sequitur’
Where the new SDLT regime does impact, is upon residential property investment companies and funds which are now required to pay the 15% rate simply because they are, by default, a corporate structure. There is no suggestion by the Chancellor that these companies are set up to avoid paying SDLT in the manner he suggests individuals are trying to, and yet so badly is this legislation drafted it catches them too. These companies will also be liable for the annual charge.
One has to bear in mind that investment in residential property by funds and institutions is being encouraged by the government to make up the shortfall in bank funding and to deliver a Private Rented Sector (PRS) of real longevity, substance & quality. Clearly this ambition and the Chancellors latest SDLT tinkering are at odds and demonstrates, if demonstration were needed, the very 'un-joined up thinking' in government and the desire to promote populist measures which do not, in fact, stand scrutiny.