HM Revenue and Customs: Improving the Processing and Collection of Tax: Income Tax, Corporation Tax, Stamp Duty Land Tax and Tax Credits - Public Accounts Committee Contents

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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