Baker Tilly’s Weekly Tax Brief…
We’ve heard a lot about property taxes recently. For example:
They’re relatively easy to collect (it’s rather difficult to hide property!) and could even be extended to tax non-residents on their disposals of second homes and investment properties in the UK. That would end a long-standing tax break where the UK is almost unique.
Property taxes already impose a huge burden on the economy and should be cut back to boost growth.
The whole structure of UK property taxes should be radically overhauled to encourage development, boost home ownership and stimulate growth.
One suggestion is that if stamp duty land tax (SDLT) was paid by the seller and not the buyer, then it could help thousands of people get on to the housing ladder by placing the burden of tax on those that are benefiting the most from the rise in property values.
We conducted a survey earlier this week asking whether people thought it made more sense for people to pay SDLT when they came to sell their homes. Out of the 97 responses, a surprising 64% of people said they thought it was a good idea.
So what would the effect be if SDLT was paid by people selling their homes?
- Well the general consensus is that it would be good news for first-time buyers – or would it? Sellers would most likely add the cost of the SDLT to the asking price of the house they’re selling, and so prices would generally inflate across the market to reflect this. Of course this would make it harder for people struggling to get into on to the housing market for the first time.
- People might be less likely to use property as an investment opportunity knowing that their profit margin would be less when they come to sell, and SDLT might be seen as a ‘tax’ on buy-to-let landlords.
- Buyers would be put off purchasing properties that needed improvement or renovation, knowing that a significant proportion of the profit they make will be handed back to HMRC when they sell.
- On a brighter note, sellers might be more likely to keep their properties under the SDLT ‘threshold’ – for instance, keeping it under £250,000 could mean the difference between paying 1% SDLT and 3%.
Of course, if SDLT was changed in this way, there would have to be complicated rules to make sure that people who own property on which they have already paid stamp duty (on acquisition) don’t have to pay it again when they sell it. The devil, as people are fond of remarking, is in the detail…
VAT: simplification, red tape or red mist?
On 1 January 2015 supplies of telecommunication, broadcast, media and content (‘e-services’) will become subject to VAT in the EU country of the private consumer.
EU providers of digital services to individuals are required to charge VAT on e-services at a single rate depending on their country of establishment, irrespective of where their customers belong. This results in consistency in pricing, and fundamentally, no requirement to establish the customer’s precise location.
But from January 2015, VAT will be charged at the rate applicable in the customer’s country of residence. This means having to understand the VAT rates and rules in each country where customers are located. Establishing the country of location may itself be a difficult task.
Take an example where e-services are received by a consumer using a wi-fi hot spot, internet café or hotel lobby. The presumption will be that the customer has his permanent address or resides at that location, and that the service is used and enjoyed there. If the customer’s location is on a ship, aircraft or train, then the location is presumed to be the country of departure.
However, if e-services are received through a fixed land line, mobile network or ‘decoder’, then it’s presumed that the customer has his permanent address or resides where the land line, SIM card or decoder/viewing card is registered and / or located.
These are just some of the challenges e-businesses will need to consider, as well as how to efficiently collect and record data about customers’ location; ensuring their IT systems and business infrastructure can adequately capture, record and declare information.
This is crucial as suppliers may need to register for VAT in the country of their customers, or register to use a ‘mini one stop shop’ (MOSS) and undertake their overseas VAT reporting requirements via online submission in the UK.
HMRC will implement a UK MOSS facility to ‘simplify’ the multi-jurisdiction VAT accounting of digital services, with registration to use this becoming available from October 2014.
But will MOSS result in ‘simplification’? The EU’s proposal indicates that suppliers may have to complete up to 19 ‘boxes’ (per country) in an online reporting form. This, in addition to the EU’s proposal for a standardised VAT return containing 26 boxes, suggests that any ‘simplification’ is on the part of the tax authorities, not the tax payer. Indeed, for the tax payer, it looks like red tape, with a distinct possibility of turning into red mist.
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