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Stamp duty receipts slump by £1 billion as Government forecasts further decline

• Further fall of £700 million may be too conservative
• Property market slump to hurt public spending

The Government has downgraded its calculation of the amount of tax it received from stamp duty in 2007-8 by £1 billion and is forecasting that the credit crunch will slash tax receipts from stamp duty by a further 5% in the 2008-09 tax year, according to figures seen by Wilkins Kennedy, the Top 30 accountants.

Wilkins Kennedy says the current forecast of a further £700 million fall in stamp duty receipts may turn out far too conservative as the crisis deepens and the number of mortgage approvals plummets by a third.

HMRC estimated on April 21st 2008 that stamp duty receipts for the 2007-08 tax year would be £15.1 billion, and increase of 13% on the previous year, but published revised figures just a few days later on April 30th 2008 revealing actual receipts were 7% lower than originally calculated at £14.1 billion.

According to Wilkins Kennedy, the bulk of stamp duty receipts are generated by property purchases, so a serious slowdown in the property market could derail Government spending forecasts.

Figures from the British Banker’s Association show that the number of mortgage loans is down 33% on this time last year as banks struggle to secure the funding they need for mortgages.

Roger Williams, Partner, Wilkins Kennedy, comments: “This is a huge slump in stamp duty receipts, but as the credit crisis deepens and mortgage approvals continue to fall, even these figures must now be in serious doubt. The Government has clearly banked on the housing market having a soft landing, but a crash now looks increasingly possible. Mortgage approvals are down a third, which would suggest stamp duty receipts may fall far more than 5% this year.”

“The commercial property market has also slowed down considerably and higher volumes of share transactions because of market volatility are unlikely to take up the slack.”

“The property market has been a convenient cash cow for the Government in recent years, but the Chancellor may no longer be able to rely on house buyers to prop up the public finances. A slump in the property market could really throw Government spending plans into disarray.”

He adds: “Gordon Brown’s justification for raising stamp duty when Chancellor was to cool the housing market down. For the sake of consistency Alistair Darling should look at cutting stamp duty to help first-time buyers now the cost of mortgages is rising. ”

ENDS

Press enquiries:

Roger Williams
Partner
Wilkins Kennedy
Tel: 01784 435561

Paul Arvanitopoulos or Nick Mattison
Mattison Public Relations
Tel: 020 7645 3636