Shhh, don’t tell HMRC, but I may have found a faultless Stamp Duty saving scheme!

While the best things in life may be free, it is an inviolable truth that the government will somehow find a way to make them taxable. While that may be the price we pay for representation (a much-debated topic since American colonists rebelled against British rule in the 1760s), not all taxes are equal. Or indeed fair. One of the most egregious examples is Stamp Duty, which is festering away under the epidermis of our beleaguered housing market. However, the good news is that there is a cure. Admittedly, you need several million swilling around in the piggy-bank to take advantage of this loophole, which up until now, has not been exposed.

If you rent instead of buy in the uber rental market, for say five years, the government will give you a rent-free tenancy for this period. Sounds implausible? Let me explain…

Treasury would trouser circa £4.5million of Stamp Duty

Up until recently, potential buyers, (usually from abroad), have been looking to purchase an uber mansion for the bargain-basement price of around £30million. Under the present heinous regime, the Treasury would trouser circa £4.5million worth of Stamp Duty. For doing nothing.  If the buyer would rent the property for, say five years, they could squirrel their entire capital abroad, splash it on loose living, or whatever proclivity they desire and instead of being mugged by HMRC, the rent for this period would amount to the same figure that would have been wasted on Stamp Duty.

If anyone needed further convincing, it should be noted that the maintenance costs of running an uber mansion – no small undertaking, when some of these service contracts amount to several hundred thousand pounds – are shouldered by the owner, while the tenant gets away scot free. The principle is akin to leasing a car (which has revitalised the motor industry) whereby you hand back the house to the landlord at the end of the period.

Much of the blame lies at the door of Osborne

From the wackademics at the Institute of Fiscal Studies1 to the hapless worker scrabbling a mortgage together for a jakey little box in Dumpsville, it is obvious that the housing market is a hot and hideous mess. Much of the blame lies at the door of previous Chancellor Osborne, who came up with the idea in 2014, probably while being toilet-trained. It has deviated the residential marketplace ever since. The Etonian-Oxbridge turnip-head gave it a nano-second’s thought, as he tried to copy the Singaporean model that used as a weapon of choice to protect their residential property market from marauding foreigners.

The acute shortage of properties on this compact and congested island has driven up prices to unaffordable levels, unless you have the pockets of an oligarch, or are a council-house beneficiary. Much of this crisis is due to the anxiety of the Stamp Duty liability which buyers face when moving home. When faced with a Berlin Wall of tax, they would rather take the option of doing nothing and staying put.

If first-time buyers and the vulnerable are ever going to participate in the property-owning democracy, they need a liquid market and plenty of supply to keep prices down.

Remember what the Road to Property Hell is paved with? Despite the earnest intentions of government-backed schemes such as Help-to-Buy etc. they are limited in scope and are often abused by wily property investors who take advantage of taxpayer-funded handouts.

One frying-pan-to-fire option

One frying-pan-to-fire option is the replacement of Stamp Duty with Capital Gains Tax (CGT) on one’s personal residence. Like all government ‘ideas’, it’s probably even worse, because fewer people would want to sell to avoid paying this tax. The USA at least, has learned a few lessons from 1776 – they have a roll-over arrangement that enables homeowners to defer the tax, sounds infinitely more sensible.

The drawback of CGT on your home is that in recessionary times you can claim Capital losses, which lowers receipts for the Treasury (some would say this is no bad thing).

Ultimately, there must be another way to derive revenue from the property market without these penal transaction taxes.

In the past the Conservatives have proposed extending the Council Tax Bands to reflect the more valuable properties, which I am sure most observers would endorse.

Wrestling match to find new Prime Minister

The government’s plan to build 300,000 new homes is woefully short of target. Meanwhile, the planning reforms that Mr. Gove was trying to introduce have been overshadowed by more pressing matters, such as the wrestling match to find a new Prime Minister.

Unless the government tackles the ever-worsening housing (or lack of housing) problem, the vulnerable will suffer and their problems will be exacerbated by high inflation, runaway energy prices and more taxation. The new inmate of Number 10 in early September will have to grab this monster with both hands and wrestle it to the ground, kicking and screaming.

Boris’s rule was political chicken vindaloo. The next mediocrity will put the nation on a diet of plain vanilla. Grey will be the new technicolour.