Angela Rayner admitted this week that she didn’t pay enough stamp duty on her £800,000 home in Hove – but experts are divided on how clear cut the rules surrounding her tax bill are.
The Deputy Prime Minister originally claimed that she did nothing wrong and had paid the full amount of stamp duty, but has since referred herself to the ethics watchdog.
She paid the standard rate of stamp duty, as opposed to the higher rate for second homes which would have been tens of thousands of pounds more.
Ms Rayner said she didn’t believe she had to pay the higher rate as she had put her stake in her constituency home into a trust, with her children as the beneficiaries.
As she had removed her name from the deed of the house, she says she was advised that she no longer counted as the owner of the property and therefore could classify the flat as her only dwelling.
The i Paper spoke to tax experts about the matter to hear their verdict on the debacle. Should Rayner have known the rules, or are they too complicated to understand?
James Quarmby, founding partner private wealth at Stephenson Harwood
The law on tax is complicated – but unfortunately for Rayner, complexity is not a defence. Ignorance of the law has never been an excuse, and when it comes to tax, HMRC makes this position clear.
Lay people are not expected to know every detail of the legislation, which is why lawyers and tax advisers exist. They are there to ensure that individuals understand their obligations and file accurate returns. They can only do this if given all the facts. We don’t know if this happened, but the subsequent fall out suggests not.
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But, failing to take adequate care – for example, neglecting to seek tax advice – is in itself treated as an offence by HMRC. Civil penalties of up to 30 per cent of the tax due can apply in cases of carelessness, and in more serious circumstances the penalties can rise as high as 100 per cent or beyond.
This principle applies to all taxpayers, regardless of status or position. Which is why the case of Ms Rayner is so striking. If Ms Rayner failed to obtain proper advice and filed incorrectly, then she is in the wrong. The outstanding duty must be paid, along with interest and a penalty for carelessness.
Put simply, we all have to play by the same rules. Politicians included – especially if they want to be trusted by their public. Ms Rayner should be held to the same standard as any other taxpayer.
‘What hope do ordinary homebuyers have?’
Arjun Kumar, founder of Taxd
Even the Deputy Prime Minister, with professional advice from three individuals, has fallen victim to this labyrinthine mess that is UK property taxes. If someone at Angela Rayner’s level can get it wrong, what hope do ordinary homebuyers have?
This case points to an issue beyond the Rayner case. It highlights a fundamentally flawed system which can destroy family finances. Labour talks about fairness, but how is it fair that families face financial ruin over rules so complex that even solicitors get them wrong?
The solution is radical simplification, not endless technicalities. There are over 50 kinds of stamp duty relief – why so many?
Of course, Rayner should have sought specialist tax advice. But the real scandal is that buying a home requires the brain of an accountant to avoid disaster.
As housing experts emphasise, buyers need specialist advice and must double-check everything, but this shouldn’t be necessary for basic property transactions.
Heather Powell, a partner at Blick Rothenberg
Stamp duty legislation is complex. The tax was introduced in December 2003 in England and it has been amended many times since this date. However, the principle that a person has an interest in residential property if they have an interest in a trust [like Rayner has] is well understood by tax advisers.
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When an individual is a beneficiary of a trust that owns a residential property, or is a trustee whose beneficiaries are children buys a residential property, their position via the trust means that the purchase is treated as the purchase of a second property.
As such, the additional stamp duty charge of 5 per cent of the purchase price of the property is charged.
This is the case of Angela Rayner.
The complexity in this situation arises as the charge may appear completely illogical to the average buyer who knows they do not own another property, or if they are selling, that they will only own one property at any time.
Advisors must ensure that they have a full understanding of their client’s position – even if the client believes their questions are intrusive or not relevant.
The advisors to Ms Rayner needed full disclosure about the nature of the family trust – whether they did or not we don’t know yet.
Relying on a description of the nature of a trust from anyone who is not a specialist can be very dangerous, as this sad tale has illustrated.
‘This is a nuanced piece of tax law – I can see how Rayner got it wrong’
Adam Johnson, director and financial adviser, New Forest Wealth Management
I’ve been following the Angela Rayner story with some interest. I tested it with one of my peer groups – around 45 advisers, probably representing 500–600 years of combined financial advice experience – and not a single one of them spotted the point that’s caught Angela and her tax advisers out.
The detail is this: once an asset is placed into a trust, if the beneficiary is under 18 and that beneficiary is your own child, then even if you are expressly excluded as a beneficiary yourself, you are still treated as owning the trust’s assets. That’s why the stamp duty position fell the way it did.
It’s such a nuanced piece of tax law that every adviser in my peer group admitted they would have taken the same view as Angela’s team — that there wouldn’t be a stamp duty liability.
It does seem remarkable that someone in such a public position has been tripped up by such an obscure rule, and I can see how even experienced professionals might have given her that advice in good faith.
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