Budget 2014: Stamp duty changes are too indiscriminate in nature

Budget 2014: Stamp duty changes are too indiscriminate

A 15% stamp duty tax on purchases of a dwelling by a company is one of new measures introduced.

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  • Today’s changes mean the rate of tax for dwellings worth between £500,001 and £1 million will rise by almost 400% where a company is the purchaser

Sean Randall, Head of Stamp Taxes at KPMG, comments on the measures introduced by the Chancellor to discourage sales of residential property bought via “corporate envelopes”, which will now apply to all dwellings worth £500,000 or more. The measures include a super rate of stamp duty land tax of 15% on the purchase of a dwelling by a company and an annual charge on the ownership of a dwelling by a company.

“The extent to which corporate envelopes are used for stamp duty land tax avoidance is unclear. But extending these measures sends a strong message that perceived stamp duty avoidance is not tolerated. The rate of tax for dwellings worth between £500,001 and £1 million will rise by almost 400% where a company is the purchaser. Put another way, a company owning a dwelling worth £500,001 will need to be sold four times before the tactic of purchasing the dwelling using a company to avoid tax becomes cost effective."

“The measures are controversial. They are designed to discourage the act of individuals putting high value residential property intended for personal use into corporate vehicles for tax avoidance. But they are indiscriminate in nature, failing to distinguish between ‘good’ enveloping and ‘bad’ enveloping, for example recognising that there are genuine reasons why companies are used to hold residential property that are unconnected with stamp duty avoidance, like privacy."

“Moreover, these measures penalise the potential for avoidance. No tax is avoided when a dwelling is purchased by a company or whilst the dwelling is owned by the company. The tax could only properly be said to be avoided if the company owning the dwelling is sold. There is no repayment of tax if the dwelling is sold by the company, so the correct amount of tax has been paid."

“The extension of the measures will increase the compliance burden for businesses investing in or developing residential property: while they are exempt they will need to file a return for the annual charge. It will also encourage individuals owning dwellings through a company to seek advice on de-enveloping.”


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For further information please contact:

Zoe Sheppard, KPMG Corporate Communications

T: 0117 905 4337

M: 07770 737 994

E: zoe.sheppard@kpmg.co.uk

KPMG Press office: +44 (0)207 694 8773

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Chancellor’s Budget 2014


About KPMG

KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with approximately 11,500 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2013. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 155,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such. 

This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.

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