Treasury and Resources
Ministerial Decision Report
Draft 2012 Budget – Proposed Amendments – Stamp Duty and Land Transaction Tax for first-time buyers and Stamp Duty Court Fees
- Purpose of Report
The purpose of this report is to request that the Minister for Treasury and Resources (“the Minister”) should amend the stamp duty revenues estimated for 2012 in Summary Table A of the Draft Budget 2012 (P.159/2011) and also to instruct the Law Draftsman to draft amendments to the draft Finance (2012 Budget) (Jersey) Law regarding:
- Reducing the rate of Stamp Duty and Land Transactions Tax charged to first-time buyers of properties with a purchase price of between £400,000 and £450,000 for a period of 12 months only; and
- The Stamp Duty Court Fees charged on actions to recover debts in the Petty Debts Court.
Stamp Duty and Land Transaction Tax for first-time buyers
- Background
Amongst other things, Stamp Duty is charged on transactions involving land, and on the registration of charges associated with land. Land Transactions Tax imposes similar charges on transactions in the shares of companies which own residential dwelling accommodation.
First-time buyers are currently eligible for relief for Stamp Duty and Land Transactions Tax in respect of transactions regarding dwelling accommodation up to a maximum of £400,000. Above that point, duty or tax is charged at the standard rates applied to all transactions. The average price paid by a first-time buyer for a house is £431,000, based on the most recent data provided by the States of Jersey Statistics Unit.
- Proposal
The housing market in Jersey has been depressed for the past three and a half years, with the number of transactions undertaken in each of 2008, 2009 and 2010 approximately 25% lower than the long-term average seen before 2008. This lack of movement in the housing market has had a knock-on effect on the broader economy, affecting estate agents, lawyers, removal firms and tradesmen.
First-time buyers are finding it particularly difficult to make their first purchases as lending institutions now require much higher deposits than previously. Deposits of 15% are now commonly required. In this environment, Stamp Duty/Land Transaction Tax is another factor which makes it more difficult for first-time buyers to get on the housing market.
In order to help to stimulate the market, and to make it easier for first-time buyers to acquire their first home, it is proposed to increase the ceiling up to which first time buyers are eligible for relief from Stamp Duty/Land Transactions Tax from £400,000 to £450,000. This represents relief of up to £6,500 for eligible individuals.
Relief will also be extended to include taxes payable on charges registered against properties of up to £450,000 for first-time buyers. This represents further additional relief of up to £1,875 per person.
The Fiscal Policy Panel has advised that Jersey’s finances are finely balanced, and counsels against taking actions now which would permanently reduce Jersey’s future tax revenues.
With that in mind, it is proposed that the increase should be a temporary one, and should apply for a period of 12 months from 1 December 2011. The impact on the housing market will be kept under review and considered again at the time of the 2013 Budget.
- Recommendation
It is recommended that the Minister for Treasury and Resources (“the Minister”) should:
i. Amend the stamp duty revenues estimated for 2012 in Summary Table A of the Draft Budget 2012 (P.159/2011) from £24,231,000 to £24,031,000 and amend the total taxation revenue figure shown in the same table from £574,778,000 to £574,578,000 ;
ii. Instruct the Law Draftsman to make the necessary changes to the Stamp Duties and Fees (Jersey) Law 1998 and the Taxation (Land Transactions) (Jersey) Law 2009 in order to reduce the rate of Stamp Duty and Land Transactions Tax charged to first-time buyers of properties with a purchase price of between £400,000 and £450,000 for a period of 12 months only.
- Reason for Decision
In order to act as a temporary stimulus to the housing market, and to make it easier for first-time buyers to purchase their first property.
- Resource Implications
There are no manpower implications. The maximum estimated revenues foregone are £200,000, of which the majority will be incurred in 2012.
Stamp Duty Court Fees
- Background
In the 2012 Budget proposal, the Treasury and Resources Minister proposed to increase court fees under the Stamp Duties and Fees and the Land Transaction Laws. One of the proposed changes relates to actions in the Petty Debts Court.
- Proposal
The current fee for actions in the Petty Debt Court where claims do not exceed £100 is £7. The proposal in the 2012 Budget was to increase this to £15 (Rate B). However there is some concern that such an increase may cause additional financial hardship to individuals who are already overburdened with financial worries. Therefore the Minister has decided to keep this fee at £7.
- Recommendation
It is recommended that the Minister for Treasury and Resources (“the Minister”) should:
i. Amend the stamp duty revenues estimated for 2012 in Summary Table A of the Draft Budget 2012 (P.159/2011) from £24,231,000 to £24,229,000 and amend the total taxation revenue figure shown in the same table from £574,778,000 to £574,776,000;
ii. Instruct the Law Draftsman to prepare amendments to the draft Finance (2012 Budget) (Jersey) Law (P.160/2011), making the necessary changes to the Stamp Duties and Fees (Jersey) Law 1998 in order to for the fee relating to actions in the Petty Debts Court where the claim does not exceed £100 to remain at £7.
- Reason for Decision
To ensure that individuals who are already overburdened with financial worries do not suffer additional hardship as a result of an increase in court fees.
- Resource Implications
There are no manpower implications. The estimated revenue foregone from the original proposals is less than £2,000 per year.
Report author : Director of Tax Policy | Document date : 31/10/11 |
Quality Assurance / Review : Head of Decision Support | File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DSs, WRs and SDs\2011-0133 - Draft 2012 Budget – Proposed Amendments Stamp Duty LTT - WM\WR - Draft 2012 Budget – Proposed Amendments Stamp Duty LTT - WM.doc |
MD sponsor : Treasurer of the States |