The super-rich are costing the taxpayer up to £1billion a year by exploiting a legal loophole which allows them to avoid paying stamp duty when selling their exclusive homes – meanwhile, ordinary families are paying tens of thousands of pounds simply to move home. The tax dodge involves transferring ownership of a property to an off-shore company so when it comes to be sold the buyer purchases the company as a whole assuming de-facto ownership of the property. This means that while a family buying a home costing £400,000 would pay £12,000 to the Government, a multi-millionaire buying a luxury pad could pay nothing.
Tax dodge: All the homes on London’s exclusive Cornwall Terrace have been transferred into offshore companies because the deal is classed as a corporate transaction as opposed to a property sale there are no stamp duty obligations involved. The extent of the avoidance was revealed in a Times report. Repeated crackdowns on stamp duty dodgers have been announced by the Government, but the wealthy are still regularly avoiding paying it.
Stamp duty on homes above £1m was raised to five per cent in April, meaning a buyer would pay a minimum of £50,000 in tax. However, while families buying homes in areas where sky-high prices have pushed the cost of a suitable property above the million pound mark will invariably pay this, some billionaires purchasing multi-million pound homes in London’s poshest postcodes avoid duty. A spokesman for The Treasury said the government is committed to ensuring that owners of expensive properties do not avoid paying the fair amount of tax. However experts believe the tax dodge is costing at least £500million a year with the true figure likely to be around £1billion.
The savings involved can be vast. Someone who purchases a £50million property though an off-shore company would avoid paying the treasury £2.5million. Most of the transactions involve central London properties which are currently seen by the super-rich as a safe haven. The practise is believed to have become more common since the levy on £1million-plus houses was raised from four to five per cent earlier this year. It is even rumoured in some quarters that the top rate of stanp duty will rise to six per cent in the Autumn statement next week. In exclusive Cornwall Terrace in North London, where the average asking price is £35 million, every single home has been transferred to a company on the Isle of Man. Now Chancellor George Osborne is coming under increasing pressure to clamp down on the practice.
Former Treasury Spokesman Lord Oakeshott of Seagrove Bay told the Times newspaper: ‘George Osborne highlighted the problem in his budget but only ticked it with a feather duster. ‘The City lawyers and accountants know how to dodge stamp duty – it is worth paying one of the millions to tell the Treasury how to stamp out the stamp duty scandal.’