The History of Stamp Duty
Chris Ward is the Managing Director at SDLT Compass. In this article, he talks about Stamp Duty and SDLT.
Stamp Duty was first introduced in England on 28 June 1694 during the reign of William and Mary, under “An act for granting to their Majesties several duties upon vellum, parchment and paper, for four years, towards carrying on the war against France”.
It was clearly a very successful way of raising taxes – because by the financial year 1702/3, 3,932,933 stamps were embossed in England for a total value of £91,206.10s.4d.
Onto a good thing, during the 18th and 19th centuries, various governments then extended Stamp Duty to cover newspapers, pamphlets, lottery tickets, apprentices’ indentures, advertisements, playing cards, dice, hats, gloves, patent medicines, perfumes, insurance policies, gold and silver plates, hair powder and armorial bearings.
In fact, Parliament needed to raise cash after the end of the 7 years’ war in 1763. Since the war benefitted the American colonists, they decided they should pay for it. Parliament loved the idea that it could easily enforce this tax, and so it attempted to enforce the Stamp Act 1765 in the British colonies. The American colonists were furious, and it led to the outcry “no taxation without representation”.
Although the outcry made Parliament quickly repeal its international Stamp Duty collection a year later, the indignation from the colonists whipped up over the following 10 years, gave rise to the revolutionary war, and ultimately led to American independence. Conveyancers can legitimately tell their clients that the argument over Stamp Duty being imposed contributed to the outbreak of the American War of Independence.
326 years on from Parliament enabling William and Mary to raise taxes on vellum, parchment and paper, and Stamp Duty’s successor (SDLT) has continued to dominate many headlines this year. The SDLT holiday announced last summer has hugely impacted the residential property teams around the country with enormous increases in transactions. The new 2% surcharge on non-resident buyers came into force on 1st April and, of course, the SDLT holiday deadline was extended in the Spring budget.
But apart from the fabulous fact that Stamp Duty gave rise to the American War of Independence and the SDLT holidays, there is something else that I talk about too frequently with property teams – which is that SDLT is not Stamp Duty. Whilst it has some of the same words in its name (Stamp + Duty), it is not the former tax on property deeds that existed pre-December 2003. We used to take or send property documents to the Stamp office, have our figures checked by a human who confirmed them in pencil on the face of the deed and then stamp machines would actually affix the right number of stamps (with tiny pieces of silver in them) on the documents, along with a Particulars Delivered stamp. But as we know, The Finance Act of 2003 largely repealed our old pal Stamp Duty, and Stamp Duty Land Tax (SDLT) was introduced in its place.
SDLT is a self-assessed tax like income tax, and HMRC can look into an SDLT return and can recover unpaid SDLT. They make a fine on the failure to submit returns in time, even if no tax is payable.
SDLT is often miscalculated because of the following:
· Pressure from the industry (conveyancers being pushed to do everything faster, sharper and better for less and less profit);
· Competition in the industry (service and pricing);
· Client demands;
· The (pretty) but basic SDLT calculations within quoting tools; and
· 49 different complex reliefs.
The problem is that there is a growing number of accountancy firms and others encouraging the public to make claims against law firms’ professional insurance, because the amount of SDLT has been overpaid. I have been told that this is the new PPI claims. These claims are either leading to higher PII fees for firms OR the firms are choosing to pay the claims themselves from their profits without going to their insurers.
The law society says: “A solicitor who does not have the necessary specialist knowledge of tax should not advise on it and may need to advise clients to obtain specialist SDLT advice, especially in relation to higher risk transactions”. And here is another fact that your teams may not be aware of – HMRC’s SDLT calculator states that it will calculate the SDLT payable for MOST transactions. They do not give you a guarantee that if you use its calculator online, your figures are correct!
SDLT Compass is the answer.
Just to remind you, the benefits of using SDLT Compass are:
Compass is a one-stop application for all your SDLT needs, helping you ensure that SDLT is calculated correctly for each of your clients first time, every time, and giving you the audit trail you need to prove it.
Compass produces an accurate SDLT calculation for your clients regardless of their circumstances or the type of property being purchased.
Compass ensures you comply with CQS and PI insurers’ requirements.
Compass ensures you avoid underestimated or overestimated SDLT claims against your firm.
Compass costs just £50 plus VAT per audit for a standard case and provides the option to refer complex cases to our SDLT tax analyst team of specialists.
Contact Chris Ward at chris.ward@sdltcompass.co.uk or visit www.sdltcompass.co.uk.