4 Stamp Duty Land Tax
17. Stamp Duty Land Tax (SDLT) replaced stamp duty
on land and buildings in 2003. SDLT revenues grew strongly following
its introduction, rising to £10 billion in 2007-08, before
falling sharply in 2008-09 to £4.9 billion (Figure 3).
The Department attributes £3.5 billion of this decline to
a fall in the number of property transactions, £1.3 billion
to the fall in the value of properties, and the remaining £0.3
billion to policy changes (such as the raising of the threshold
for the 1% band).[41]
Figure 3: Stamp Duty and Stamp Duty Land Tax receipts
Source: C&AG's Report
18. In introducing SDLT, the Government's objectives
were to promote fairness by addressing stamp duty avoidance; support
e-business through, for example, online filing; and to create
a modern legal framework for stamp duty in line with other taxes.[42]
The Department acknowledges that it did not implement this change
well.[43] The computer
system for processing the tax was not ready when the tax was introduced
in 2003. This led to staff being diverted from other activities,
such as compliance work, to process the SDLT returns.[44]
The problems with the SDLT system have now been addressed and,
with 83% of taxpayers filing on-line, the tax now has the greatest
online take-up of any tax where electronic filing is not compulsory.[45]
19. As a self-assessed tax, the responsibility to
calculate and pay the correct SDLT liability rests with the taxpayer.
The introduction of self assessment and online filing, along with
the centralisation of SDLT administration in the Birmingham office,
has enabled the Department to make savings, with the number of
staff working on the tax reduced from over 400 to around 135.[46]
20. The Department undertakes enquiries into SDLT
returns to assess how well taxpayers are complying with their
obligations and makes its own assessment where it finds they have
not paid the correct amount of tax.[47]
This compliance work was disrupted on the introduction of SDLT
in 2003 because of the diversion of staff to support processing,
and again in 2007-08 when the Bristol and Manchester offices were
closed and the administration of the tax centralised in Birmingham.[48]
Only three staff transferred to the Birmingham office, resulting
in a loss of cumulative expertise. New staff had to be trained
and familiarise themselves with transferred enquiries. As a result,
the compliance yield fell from £10.9 million in 2006-07 to
£3.4 million in 2007-08.[49]
21. The compliance yield rose in 2008-09 to £13.3
million. The Department attributes this success to lower staff
turnover in the compliance team and its greater focus on high
yielding cases.[50] However,
it only opened 203 enquiries in 2008-09, a tiny proportion of
the one million returns received in the year.[51]
22. The Department believes that the main risk to
SDLT is from avoidance, particularly in the commercial sector,
but has found it difficult to estimate the scale of avoidance.[52]
The Disclosure of Tax Avoidance Schemes regime was extended to
SDLT in August 2005 and requires promoters of avoidance schemes
to notify the Department of avoidance schemes only involving commercial
property with a market value of over £5 million. Unlike for
other taxes, the disclosure rules did not require users of SDLT
avoidance schemes to tell the Department when they were using
a scheme.[53] The Department
is extending the disclosure rules to residential property and
requiring users of avoidance schemes to tell it when they use
a scheme.[54]
23. The Department does not have an estimate of the
tax gap for SDLT.[55]
In the absence of an estimate it is difficult for the Department
to know whether it is doing enough work to tackle avoidance and
non-compliance. It has a project underway to assess the scale
and scope of avoidance, which it hopes will help it estimate the
SDLT tax gap.[56]
41 C&AG's Report, para 2.7 Back
42
C&AG's Report, para 2.1 Back
43
Q 7 Back
44
C&AG's Report, para 2.10 Back
45
Q 7 Back
46
Qq 8 and 75 Back
47
C&AG's Report, para 2.16 Back
48
Q 75 Back
49
Q 74; C&AG's Report, para 2.20, Figure 7 Back
50
C&AG's Report, para 2.21 Back
51
Q 8; C&AG's Report, para 2.22 Back
52
Q 90 Back
53
C&AG's Report, para 2.33 Back
54
Q 91; C&AG's Report, para 2.40 Back
55
C&AG's Report, para 2.8 Back
56
C&AG's Report, para 2.41 Back
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