The temporary stamp duty land tax holiday has been welcomed by many in the profession, but doubts were raised about the effectiveness of the government’s other ‘kickstart’ initiatives
Solicitors found reasons for cheer in chancellor Rishi Sunak’s summer statement last week – and not just the prospect of £10 off a three-course lunch at JD Wetherspoon. Law Society president Simon Davis noted that the £1,000 ‘job retention bonus’ could help struggling smaller firms, while the ‘kickstart’ scheme for employing young people could boost the number of legal apprenticeships.
However, the biggest plaudit went to the well-trailed announcement of a holiday from most stamp duty land tax levied in England. (The Welsh government is expected to announce a decision on its land transaction tax this week.) ‘This is a time of upheaval in the lives of many who need to move home for various economic, social and personal reasons,’ Davis said. ‘A temporary reduction in residential property transaction costs to support such people and to bring forward demand makes sense. It will also be welcome news for solicitors whose volume of work has fallen.’
Following Sunak’s announcement, the nil rate threshold for stamp duty on residential property in England and Northern Ireland rose from £125,000 to £500,000 until 31 March 2021. This means that almost nine out of 10 transactions will be tax-free, at an expected cost to the exchequer of £3.8bn.
Tim Rowe, tax manager and SDLT specialist at accountants Milsted Langdon, said: ‘With the average SDLT bill more than £4,000 and a potential SDLT saving on all residential properties of up to £15,000 per property, this could be a massive incentive to those looking to move or acquire further property. This will help to drive demand in the sector.’
However, thinktank Reform noted that the market had been rebounding already. ‘There is a risk that the chancellor has just given away almost £4bn to solve the wrong problem,’ it said. ‘The bigger issue may be banks reluctant to give mortgages.’
As with tax breaks in general, the SDLT holiday is easier to implement than it will be to curtail. ‘The government must remain vigilant to ensure the right balance of stability, fairness and confidence in the market is in place once the holiday ends,’ Davis cautioned.
Thinktank the Centre for Policy Studies said the concession creates an opportunity for outright abolition of what it calls ‘a tax on mobility and aspiration’. Alex Morton, head of policy, said that while the headline cost would be £5.1bn, this falls to £3.3bn once the dynamic effects of market stimulation are counted.
Other announcements by the chancellor also attracted quibbles about timing and scope. The Society expressed disappointment that the chancellor did not go further with the kickstart scheme. Davis said that legal employers could create jobs if they were able to spend apprenticeship levy money in four areas:
- Lawtech seats and training in lawtech skills;
- Training in secondary specialisations, which will enable people to retrain in other practice areas;
- Training contracts to maintain the jobs pipeline for students about to complete the LPC; and
- Supporting other organisations (including in the third sector) by funding joint roles. This would enable firms to deliver pro bono work in partnership with legal charities.
As previously trailed, Treasury documents published alongside the statement show investments including £102m to modernise the court estate in England and Wales. This will include £55m for essential court maintenance, £37m for technology to fast-track the digitalisation of the courts, and £10m for local regeneration projects outside London and the south-east.
Steven Littlewood, national officer for the Crown Prosecution Service at the FDA trade union, was unimpressed. He described the announcement as a ‘good start’. However ‘it will take more than a lick of paint to clear the backlog of 40,000 cases. We need more investment in both defence and prosecution to ensure that our system is properly resourced and delivers justice for the public’.
For details of any more investment – and further changes to the tax regime – we will have to wait for the chancellor’s next substantive budget, promised for this autumn. But with a combination of the decisions announced in the summer statement and plunging tax revenues pushing the deficit up to more than £360bn, it will be hard to see scope for future ‘meal deals’.
National Property Law Conference
Webinar series, 6 – 8 October 2020
Growing your practice in a challenging climate, the increase of cybercrime attacks and the continued uncertainty of the economy and property market are likely to affect conveyancers and property practitioners. Join the Law Society’s nineteenth annual Property conference where industry experts will offer the tools and support to equip you in these areas. We will also provide the latest updates on; residential conveyancing, the new commercial property documents, and how conveyancing might develop in the future.