More people own their home outright, up from 29 per cent to 31 per cent (7.2m). Just 33 per cent of households have a mortgage, down from 39 per cent, something politicians need to remember when they focus on pushing down interest rates at all costs, actively hurting or failing to help 61 per cent of the public. Those renting privately have jumped from 9 per cent in 2001 to 15 per cent (3.6m) in 2011; it is a good thing that Britain now has a privately provided rented sector but unfortunate that so many who would like to buy cannot. But the government must tackle a problem of its own making – an artificial scarcity of homes – without creating another – subsidising lenders with limited deposits or forcing banks to lend more than they are comfortable, a strategy guaranteed to end in tears.
Another day and yet more complex and near incomprehensible tax legislation from the government in the form of the Finance Bill.
This time, as we explain below, there is an 80-page document which seeks to explain how the mansion tax will apply to high-value homes held by companies – unfortunately, even many of the tax experts commenting on it seemed pretty baffled. The good news is that there are now carve-outs for bona fide businesses such as developers, traders and for investors holding buy-to-let properties – the bad news is that these rules involve yet more complex rules that will probably discourage investment into the UK and raise little or no revenue.
The government also released draft legislation and guidance notes on the proposed General Anti Abuse Rule (GAAR), which aims to eliminate contrived tax arrangements that are entered into simply to avoid UK tax. If such a scheme could work, it would be excellent progress – but as yesterday’s release shows, the complications are devilish and nothing is yet set in stone. The danger is that the tax system becomes even more arbitrary and unpredictable.
Last but not least, the introduction of a US-style Alternative Minimum Tax to restrict the amount of reliefs that can be claimed is silly. If the Chancellor thinks there are too many loopholes, then he should shut them. Operating a dual system whereby people first calculate their tax return on the basis of the current laws, and then again a second time to make sure they don’t claim too many allowances, merely adds another degree of complication – and in any case donations to charity or investments in EIS schemes no longer count against the total limit. Yet again, all of this shows the urgent and desperate need for comprehensive tax reform, to make the system clearer and simpler, rather than endless piece-meal tweaks that mean that even accountants now need to hire other accountants to do their tax returns.
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