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Stamp Duty Land Tax Bill

Volume 590: debated on Monday 12 January 2015

Considered in Committee

[Mrs Linda Riordan in the Chair]

Clause 1

Change in method of calculating tax on residential property transactions

Question proposed, That the clause stand part of the Bill.

It is a great pleasure to serve under your Chairmanship, Mrs Riordan, and to debate the Bill.

Clause 1 amends section 55 of the Finance Act 2003 to change the basis of calculation for stamp duty land tax on residential property transactions, and provide a new table of rates and thresholds that apply to those transactions. It also introduces the schedule that makes the consequential changes to SDLT, and to the method of calculating the amount of tax due when certain reliefs are claimed. As right hon. and hon. Members will be aware, the measure came into force through a resolution under the Provisional Collection of Taxes Act 1968 for transactions whose effective date—usually the date on which the purchase contract is completed—is on or after 4 December 2014.

Let me briefly remind the House why we have introduced this important and comprehensive reform to SDLT on residential property. In essence, the stamp duty system on residential property as it previously stood was flawed and widely criticised, and it created an enormous hike in taxes at certain thresholds. Someone paying £250,000 for a house would pay £2,500 in stamp duty, but if they paid £250,001, they would pay £7,500—three times as much. Inevitably that created peaks in transactions at those thresholds and dead zones above them, and that big distortion affected a significant number of properties. We have got rid of the inefficient and distorted old system and replaced it with a fairer new system that cuts SDLT for 98% of those who pay it. No buyer of a property under £937,500 will pay more SDLT than they would have done before 4 December. We have provided a calculator on the HMRC website so that people can work out how much tax they will pay, and I am happy to confirm that to date it has been used more than 1.25 million times.

As the Minister points out, this change will result in savings for the vast majority of people purchasing a home. What assessment has he made of the impact on house price inflation as a result of the changes?

There may be a slight impact on house prices, but we must put that in context. Many factors determine house prices, and on the evidence before us our view is that the changes will not have a significant impact on the overall level of house prices. They are likely to have a bigger impact on removing some of those dead zones and distortions in the housing market, which is beneficial in creating a more efficient and effective housing market.

The reform has been welcomed by right hon. and hon. Members in all parts of the House and by outside bodies, including the Council of Mortgage Lenders, the Institute of Directors and the Institute for Fiscal Studies. Jonathan Isaby, from the TaxPayers Alliance, called it:

“an early Christmas present for young people looking to get on the housing ladder.”

Will the Minister comment on the impact on revenue? He may collect more revenue where rates have been cut, but lose revenue at the top end.

That is not our assessment. My right hon. Friend is an eloquent and distinguished advocate of the argument that it is possible to raise more revenue by reducing rates, and he has over many years demonstrated cases where that would apply. I do not believe that we will quite see that dynamic effect to that extent in this case. I think more revenue, and certainly a greater proportion of it, will be raised from properties above £2 million. Undoubtedly, we will see a few more transactions, which will mean additional revenue that would otherwise not come in. On balance, we will see a reduction overall in revenue across the SDLT regime, but we believe that that is none the less the right thing to do to ensure that we deliver a reform that benefits the vast majority of people who pay SDLT.

Under the rules as they applied on 3 December, the amount of tax payable was a percentage of the chargeable consideration—the purchase price—for the acquisition of the property. Different scales of percentages, table A and table B, applied respectively to transactions consisting wholly of residential property and to transactions that consisted of, or included, non-residential property. The clause substitutes a new table A, setting out the new tax rates and bands that apply to a transaction consisting wholly of residential property. It also amends the calculation rules for those transactions, so that each rate of tax applies only to that part of the consideration that falls within the relevant band. The total tax due is then the sum of the amounts of each band.

I stress again how welcome the change has been for residents in St Albans, particularly at the lower end of the market where there have been big savings. Has consideration been given to expanding the scheme to commercial properties, and not just keeping it to wholly or partly residential properties?

All these matters are kept under review. My hon. Friend has been a consistent and doughty campaigner for reform in this area. If we had exactly the same system in place for commercial property, with the same thresholds and so on, we would be imposing a much greater burden on commercial property transactions, because by their nature they tend to be of a more substantial size. There is a higher level of consideration in place than for most residential property transactions. The argument for reform for residential property was particularly strong, which is why we took these steps. Consideration of whether there is a strong and persuasive case for reform for commercial property is perhaps a matter for another day.

I join my hon. Friend the Member for St Albans (Mrs Main) in welcoming the provisions, which will provide a great deal of assistance to the housing market.

The Minister knows that for some time I have been pursuing stamp duty land tax for all those affected by the notorious HS2 infrastructure project. Is the Minister willing, while he is looking into this matter, to review those provisions? The SDLT relief applies to only a very narrow number of properties. To keep the property market operating normally, it should be possible to extend it to properties up and down the line that are being so adversely affected by the project.

I am grateful for that observation from my right hon. Friend and constituency neighbour. I know well how the issue of SDLT in general must be relevant to many of her constituents. On the specific point about HS2, the Government remain to be persuaded that SDLT is necessarily the right measure for addressing the concerns that she identifies and on which she provides an articulate voice in defence of her constituents and others affected by the project. We remain to be convinced, but I know that she will continue to make her argument, and we will continue to look at it carefully. As I said, however, we are not yet convinced that reform of SDLT, or an exemption or relief, would necessarily provide the right support for those with properties affected by HS2.

Clause 1 substitutes a new table A setting out the new tax rates and bands applying to a transaction consisting wholly of residential property and amends the calculation rules for these transactions so that each rate of tax applies only to that part of the consideration that falls within the relevant band. The total tax due is then the sum of the amounts for each band. The new calculation rules extend to linked transactions—those that form part of a scheme arrangement or a series of transactions between the same buyer and seller. In this case, SDLT applies to the aggregate consideration for all the linked transactions.

The new rules do not apply to transactions to which table B in section 55 of the 2003 Act applies—transactions or linked transactions consisting wholly of non-residential or a mixture of residential and non-residential property. The clause introduces the schedule, which makes consequential amendments to SDLT legislation to take account of the reform. The main changes are to the method of calculating the tax due under certain SDLT reliefs. The first relief is for statutory leasehold enfranchisement, where leaseholders of flats club together to buy the freehold of their block. This relief formerly operated by setting the rate of SDLT according to the amount paid for the freehold, divided by the number of qualifying flats. Under the new arrangements, first we divide the amount paid for the freehold by the number of qualifying flats and calculate the amount of tax due on that sum. We then multiply that amount of tax by the number of qualifying flats in order to arrive at the total tax due.

Secondly, a similar change is made to relief for purchasers of multiple crofts from a landlord by a crofting community body under the crofting community right to buy scheme. This relief only applies in Scotland so will only be relevant until 1 April 2015, when SDLT in Scotland is replaced by the devolved land and buildings transaction tax.

Finally, a similar change is made to multiple dwellings relief, which applies to purchasers of more than one dwelling in either a single transaction or linked transactions. This relief was previously subject to a minimum rate of 1%. Under the new rules, the amount will be equivalent to 1% of the chargeable consideration given for the dwellings, which in practice gives the same result.

Right hon. and hon. Members raised several important points on Second Reading. I would like to take this opportunity to explain in a little more detail the Government’s position on some of those issues. First, it has been asked why we have chosen not to apply the new rules to non-residential—commercial and agricultural —property as well as to residential property. That point was raised just now by my hon. Friend the Member for St Albans (Mrs Main). As I said, the market for non-residential property is very different from the market for residential property. For example, non-residential properties have a higher value on average and many are held on market rent leases granted for a small or no premium. At this time, the Government do not feel it appropriate to make changes to non-residential SDLT, although all taxes are kept under review as part of the policy making process. Any change to non-residential SDLT would have to be considered very carefully.

Some concern has been expressed about the possibility of purchasers avoiding SDLT by designating the property as either residential or non-residential in order to obtain a more favourable result. What constitutes residential property is set out in the legislation. Property can be either residential or non-residential, which is a matter of fact. There is no option, as it is has been suggested there is, to flip property between one and the other. I can reassure the Committee on that.

Finally, it has been suggested that the highest rate of tax payable under the new rules might reduce the disincentive to envelope residential property provided by the 15% higher rate SDLT charge, which applies to purchasers of residential property by a company or other non-natural person. The highest marginal rate of SDLT for the purchase of residential properties above £1.5 million is now 12%. However, SDLT is charged at 15% on the whole value for residential properties bought through corporate envelopes for more than £500,000. We are not proposing to make any changes to the 15% higher rate charge. However, in the autumn statement, we announced that the annual charges of the annual tax on envelope dwellings—ATED—would increase by 50% above inflation for the chargeable period 1 April 2015 to 31 March 2016 in order further to discourage the use of enveloping. The Government keep all taxes under review where individuals continue to hold property within corporate wrappers. They should be prepared to pay their fair share of tax.

These reforms to SDLT will remove the previous economic distortions in the system, benefiting the housing market and improving the fairness and efficiency of the tax system. They will give another boost to people looking to fulfil their aspirations of owning the place they live in and will make a real tangible and positive difference to the lives of people up and down the country.

It is a pleasure to serve under your chairmanship, Mrs Riordan.

I thank the Minister for his introduction to clause 1 and schedule 1. Let me confirm from the outset that we support these measures, as we did in the previous two debates on the Bill. We will do so again today. As I say, we have already had a couple of debates and it is a small Bill, so many of the issues have been debated thoroughly before. I am grateful to the Minister for dealing with some of the questions that arose on Second Reading. I have just a couple of points on which I would like to press him, and I will be grateful to hear his response in his summing up.

First, can the Minister provide us with an update on HMRC’s handling of the queries that arose when these measures were announced? Can he confirm the number of queries that HMRC had to deal with, clarify the nature of the queries that the public or their advisers raised and confirm whether all outstanding queries have been dealt with?

Secondly, let me press the Minister a little further on the revenue. I put some points to him on Second Reading about the expectations of revenue, but that matter has not been fully covered by the responses we have received. The Minister knows that these measures are expected to cost £395 million in 2014-15, rising to £760 million in 2015-16. Research by Lonres and Dataloft has found that more homes changed hands on the day of the autumn statement than on any other day in the past decade, so one in six of all homes sold in London’s most expensive areas in the last three months of the year changed hands on 3 December. The research by Lonres and Dataloft estimates that, as a result, buyers saved £9.4 million in taxes. Is that in the order of the behavioural change that was expected, as modelled by the Treasury in its costings? I am sure the Minister will repeat that they have been independently certified by the Office for Budget Responsibility.

I should like to know whether the number of transactions and the cost in Exchequer revenue after the announcement of the measures in the autumn statement are along the lines that the Government were expecting. As the Minister knows, the Office for Budget Responsibility, which applies a rating system to the “certainty” of costings, has said that it considers the costings to be medium to high risk. How confident is he about the numbers, and about the extent of the behavioural change that is expected?

I am delighted that the hon. Lady and her party welcome measures that are intended to help people who aspire to own their homes. How does she think this policy contrasts with a policy of an annual property tax which may force some people out of their homes if they have to pay it?

I think that the Bill shows that the Government have accepted that properties with a very high value are under-taxed. The hon. Gentleman alluded to our proposals for a mansion tax, which would help to pay for our NHS commitments. Our measures will not force anyone out of their homes, because, as we have pointed out, a deferment option will be available to basic-rate payers. I am afraid that that was a bit of party political scaremongering on the hon. Gentleman’s part.

The hon. Lady mentioned the mansion tax. My constituents fear that the threshold might start at, say, £2 million, and then drop very quickly to levels applying to properties that ordinary hard-working taxpayers are aspiring to own. The Labour party has done that in the past. Will the hon. Lady tell us what would be the threshold for her so-called mansion tax?

I am delighted that the hon. Gentleman has given me an opportunity to tell his constituents that their fears are entirely misplaced. Anyone who publishes literature suggesting that the threshold will lower is doing nothing more than scaremongering. As we have made clear, the number of high-value properties will not increase, because the indexation of the threshold will be in line with the average rise in value for the highest-value properties. That means that the number of properties caught by the tax is not expected to increase. I am, as I say, delighted that the hon. Gentleman has given me an opportunity to reassure people who are currently living in properties that are below the £2 million threshold that they will not be caught by our proposed mansion tax.

The Minister explained that the changes in the Bill would not apply to commercial property, and I am grateful for his clarification of the Government’s thinking. However, I should like to press him a little further on a couple of matters. First, one of the reasons why the Government were so keen to proceed with stamp duty changes applying to residential property was their anxiety about labour mobility. Has any thought been given to the impact on business mobility of maintaining the slab structure for commercial property transactions?

Secondly, changes will come into effect later this year in Scotland, where stamp duty is now a devolved matter. The Scottish Government will introduce a land and buildings transaction tax, which will apply to both residential and commercial properties. Have the Minister and the Treasury considered whether there is a risk that England might be disadvantaged, particularly in relation to business mobility? Does the Minister agree that the differential in the treatment of commercial property in Scotland and England is not ideal, and is the Treasury taking account of that aspect of the changes?

Finally, I want to raise a point that has been highlighted by the Chartered Institute of Taxation. It noted the different treatment given to definitions of residential dwellings, and observed that clause 1(3) inserts new subsection 1B:

“If the relevant land consists entirely of residential property and the transaction is not one of a number of linked transactions, the amount of tax chargeable is”,

and so on. The CIOT notes that various amendments to the tax system, including the introduction of the annual tax on enveloped dwellings, or ATED, have led to subtly different definitions of “residential” property for the purposes of SDLT. In schedule 29A to the Finance Act 2004 there is different treatment for investment-regulated pensions and potentially for capital gains tax, capital gains tax-related ATED, business investment relief for non-domiciliaries, capital allowances and VAT.

The Minister and I have had a number of debates when discussing other Bills about the different treatment given to particular phrases in employment law as against taxation law. There seems to be a nuanced difference in the way residential dwellings will be identified in these different elements of different taxes. I am concerned that inconsistencies are creeping in, which lead to complexity and create more work for lawyers. They will welcome that, of course, but ordinary taxpayers will not. It would be helpful if the Minister could give us his comments on those differences in definitions and say whether the Government are considering clarifying that.

I will keep my remarks brief. I have spoken in each previous debate and do not have a great deal to add. My party very much supports these measures and, as I have said in previous debates, dealing with the slab system that we had and the consequent cliff edges and removing the incentives for strange behaviour and sub-optimal activity has to be the right thing to do.

I have only one point to add, which partly follows on from the remarks of the right hon. Member for Wokingham (Mr Redwood) and the assessments of the Office for Budget Responsibility. I would have thought that the taxation of a fixed asset transfer like this, with the certainty that that implies, would mean this is a very low risk method of changing a tax system, but if the OBR regards it as medium to high risk, and if the right hon. Gentleman is suggesting there may be more complex effects that I have not understood, I would like the Minister to clarify whether I am missing something. I would have thought this was a very straightforward way of raising taxes in a highly certain manner—and certainty is, of course, one of the hallmarks of a good tax system.

I will not detain the Committee any longer. Our party supports these measures. They affect 98% of the population favourably, and, broadly speaking, the other 2% are millionaires, and therefore those with the broadest shoulders. I am pleased that through this Bill this Government have found yet another way to help deliver a small amount of redistribution, with the pain felt by those with the broadest shoulders. The support for it is universal in my constituency, as I think everybody will be a winner. Overall, these measures will lead to a more liquid housing market and therefore a stronger economy, and they also make the system fairer.

First, may I remind the Committee that, as listed in the register of Members’ interests, I provide advice to an industrial company and an investment company?

The Minister has produced what is on the whole an excellent scheme. I support most of it and was one of those, along with my hon. Friend the Member for St Albans (Mrs Main), who was lobbying hard to get this major reform through. I congratulate the Minister and the Chancellor on dealing with the problems that the slab system created. The peaks and the dead areas were damaging to the property market and made it difficult for some people to buy or sell properties in certain price ranges. The system probably distorted pricing as well, to the benefit of some people and the detriment of others. It is therefore good that we have smoothed it out and introduced a more sensible progression up to £937,000, where most of the transactions lie. The new arrangements will represent a fairer, lower-cost system for practically all transactions, which is wholly admirable.

I want to tease out a little more information about the rather pessimistic forecasts of how much revenue will be lost up to the end of this decade. It is clear from the figures that cutting the higher rate of income tax has produced considerable extra revenue, as it was bound to do, given that the previous rate deterred people or meant that they did not come here at all. It is also clear from the figures that the much higher rate of capital gains tax has been very damaging to revenues, which are still miles below where they were prior to the crash. This is a difficult one to call, and I am not saying to the Minister that the proposals would either damage or increase revenues. I am merely suggesting that the Treasury’s forecasts for that lengthy time period could prove to be inaccurate, and that it would be nice to unpack those forecasts in order to understand what the Treasury thinks is going on.

The problem with trying to forecast the revenues at this juncture is that, on the one hand, we have seen a slowing of the mortgage market in recent months through regulatory intervention, and we would therefore expect fewer transactions because the regulators and the banks are now being much tougher about mortgages. On the other hand, however, we have Government intervention trying to mitigate that effect through the very successful and helpful Help to Buy scheme, which I believe to be necessary. It is certainly helping people in my area to buy their own home. However, the net result of these arrangements seems to be a dampening of transactions, and we must bear that in mind when trying to judge the impact of those policies and to assess the impact of the stamp duty change. All things being equal, we should expect to see an increase in the volume of transactions under the £937,000 level because buying such homes will be a bit cheaper, and in certain price bands we will see activity occurring that would not have occurred at all because of the slab effect.

Does my right hon. Friend share the optimism that I feel, having talked to small businesses in my community, that there could be a knock-on effect from people having a bit more money to carry out home improvements? Those businesses have suffered in recent years because people have not been investing in their own homes.

Yes, indeed there could.

This is difficult to predict, because all these things need to be modelled. The level of the reduction in some cases is quite large, and it will be difficult to make up for all that lost revenue through increased transactions. That is why it would be interesting to probe the Treasury a little more on its forecasts. I expect it thinks that there will be quite a big revenue gain where the rate has gone up, but that effect might not prove to be as strong as it hopes, because there will definitely be a disincentive effect at the top end following the introduction of the very top rate for the privileged few who can afford those types of properties. Those people are often in the fortunate position of owning more than one property, and of being able to decide whether they wish to buy property in this country or elsewhere. There will be some kind of disincentive effect, and we need to look at relative taxes and relative prices in relation to London and other centres.

It would therefore help if we knew a little more about the Treasury’s numbers at this stage of the debate, so that when we review this policy in a year or two, we can see what was right and what was wrong. For example, does the Treasury think that there will be extra revenue from the higher rate? That has clearly not been the case in relation to the two big taxes that I have mentioned. Does it envisage a loss of revenue despite the effect on transactions at the lower level? It would be good to have more detail, so that we can have some benchmarks as we try to assess the financial impact of the policy.

I thank all right hon. and hon. Members for their contributions to this short debate on clause 1, and I shall attempt to address as many as possible of their questions. The hon. Member for Birmingham, Ladywood (Shabana Mahmood) raised a number of points about the impact of the changes. First, let me deal with her question about HMRC’s handling of inquiries. I do not have all the detailed numbers available, but, as I mentioned earlier, about 1.25 million hits have been made on the HMRC calculator, which is a substantial number. There have been relatively few queries made over the telephone or in writing. In practice the great majority of those can be dealt with by HMRC’s stamp tax helpline or by reference to ongoing guidance. More complex queries are escalated to HMRC’s technical specialists. As I say, I cannot give the numbers but I do know that the view within HMRC is that this process has gone smoothly, including in respect of the helpline provided on the day of the autumn statement, when, as has been pointed out, a number of transactions were accelerated in order to benefit from the transitional regime. All that has gone smoothly and I am not aware of any particular difficulties in that area.

Let me now deal with the definitional issues the hon. Lady raised. Ideally we would have a single definition for all tax purposes, and this is not an issue specific to what we have before us today—it is a wider point. Different areas of the tax system have different purposes. The same definition will not necessarily serve all purposes adequately, and so some differences are probably inevitable. However, we do keep all aspects of the tax system under review and we will consider simplifying definitions where that is desirable and practical. I am not aware of any particular difficulties in this context, but it is always worth having another look at this point over time to see whether problems emerge.

On the point about non-residential property, it is worth pointing out that if we were to have exactly the same regime applied there, approximately 40% of tax-paying non-residential transactions would pay more. That would not be terribly attractive for businesses. If we examine the costings of such a move on a purely static basis—I shall return to costings points in a moment—by which I mean there is no behavioural change, we find that a switch to an identical system for commercial property would be a substantial revenue raiser. It would raise about £3.6 billion, but that represents a substantial increase in the burden of SDLT on business and we do not believe it would be advisable. That is one reason why we have not gone down that route. So, inevitably, different regimes will apply for residential and non-residential property.

The hon. Lady asked whether the continuation of a slab structure for non-residential property could result in damage to business mobility. I make the point, of course, that the Government keep all taxes under review. Businesses incur costs from all manner of sources, of which SDLT is just one. The rates of SDLT in England and the land and buildings transaction tax in Scotland will differ owing to the natural consequences of devolution. It is unlikely that many businesses will move from England to Scotland, or vice versa, just because of changes in the SDLT or LBTT regimes.

My right hon. Friend the Member for Wokingham (Mr Redwood) and my hon. Friend the Member for Redcar (Ian Swales) raised the issue of costings, with my right hon. Friend rightly making the point that he was a strong advocate of reform in this area. We have to understand that a number of factors are involved in a change in SDLT in these circumstances. There may be changes in the number of transactions that occur depending on what is done with the rates. There may be changes in the value of the properties. To what extent will those changes be capitalised? There are also the changes in the amount paid per transaction. To make an assessment of how much will be raised or forgone as a consequence of these changes, it is necessary for the Treasury and HMRC and then the Office for Budget Responsibility to assess the behavioural changes.

To answer the point raised by my hon. Friend the Member for Redcar, the challenge for the OBR and the reason why it has rated this as a medium to high risk is that there will always be a degree of uncertainty over the behavioural response. Will people be much more inclined to move property as a consequence of these changes? A number of assumptions are made. We believe that the costings are robust, sensible and essential.

The overall impact will be additional revenue being raised at the top end—those transactions above £937,000 where a higher rate would apply. Even accepting that there may be an impact on the number of transactions and on property prices, the changes in the amount of stamp duty paid per transaction will mean that the overall effect will be to bring in revenue. But the reverse process applies for the vast majority of transactions where there is a reduction in rates. We may see more transactions and prices increasing slightly, which means that a slightly higher amount of SDLT will be paid. But the overall effect will be less revenue from those areas.

I thank the Minister for giving way and for his very helpful clarification. It is worth putting it on the record that the opportunities for avoidance of this particular tax, such as time shifting, charging different expenses and reclassifying income or capital gains, are simply not there against a fixed asset of this nature. Although I accept his clarification around those behavioural effects, it is worth saying that the public will not have any opportunities to avoid this tax in the way that they might avoid other taxes.

My hon. Friend brings me to an important point, which is that, over the course of this Parliament, the Government have been determined to address stamp duty land tax avoidance. It was a problem in the tax system. One certainly heard both anecdotally, and in the concerns of HMRC, of transactions being made to envelope properties and so on, which is why in 2012 we announced the introduction of the annual tax on envelope dwellings. It is why, over the course of this Parliament, we have taken a number of actions to deal with that avoidance. Had we not done so, it would have been difficult to make the reforms that we have in front of us today in an affordable way, as we would not effectively have been able to raise additional revenue from the top end of the housing market to counteract the reductions in revenue that will occur in the rest of the market.

Increasing rates would not have led to much, if anything, by way of additional revenue, because we would have found that it would have increased avoidance activity and we would not have got in the money that we would otherwise have done. As a consequence, the costs would have been unaffordable.

Are there not two obvious ways in which certain groups of people in the higher value properties decide not to pay this tax? The first is people who are in a two to three-bedroom flat or a small house in a very expensive part of the UK, normally London, may decide that they do not want to swap properties or downsize or upsize because it is too expensive. The other is that the very rich people at the top end coming in from abroad may decide that this is the straw that breaks the camel’s back on the transaction. Some people might welcome that but it could still be a behavioural impact of this particular provision.

My right hon. Friend is right to say that there will be behavioural responses. Some people might be dissuaded from entering into a transaction and decide to remain in the same place as a consequence of a higher level of duty. There may also be an impact on the attractiveness of the UK as a place in which to locate, but as he is well aware, that is but one factor among very many. I can think of greater threats to the attractiveness of the UK. I should not get drawn into what those threats may be, but they certainly exist. I am tempted to turn to the Opposition’s mansion tax, but I dare say you would haul me into line, Mrs Riordan, so let me not be drawn into what others might say. There is much I want to say, but it would probably not be in order.

I hope that my remarks are helpful to the Committee, and that the clause will stand part of the Bill.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Citation, commencement and transitional provision etc

Question proposed, That the clause stand part of the Bill.

The clause provides for the new method of calculating SDLT introduced by the Bill to apply to transactions where the effective date is on or after 4 December 2014. It introduces transitional provisions that apply in cases where contracts were exchanged before 4 December, but the contract was completed on or after that date. Under the rules, a purchaser may elect that the new rules do not apply. The election is made in a land transaction return, and must comply with any requirements specified by the Commissioners for Revenue and Customs.

I should clarify a remark made by my hon. Friend the Exchequer Secretary on Second Reading in response to a question asked by my right hon. Friend the Member for East Yorkshire (Sir Greg Knight). The requirements are set out in the HMRC guidance published on 3 December, and simply serve to explain how the taxpayer should make an election; they do not restrict the application of the legislation in any way.

An election for the transitional provisions to apply is made simply by self-assessing the relevant amount of tax due in the return, or by amending the return, which may be done within 13 months of the effective date of the transaction. The transitional provisions are designed to protect purchasers who, before the changes were announced, entered into a binding contract in the expectation that the old rules would apply. In practice, more than 98% of purchasers will benefit from, or at least be no worse off under, the new rules. The transitional rules will ensure that those who exchanged contracts before 4 December are not disadvantaged as a result of the changes introduced by the Bill.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Schedule agreed to.

The Deputy Speaker resumed the Chair.

Bill reported, without amendment.

Third Reading

I beg to move, That the Bill be now read the Third time.

Let me start by thanking all right hon. and hon. Members who have contributed to the scrutiny of the Bill and who have done so in a constructive and positive manner. There has been considerable consensus and agreement on its contents and I welcome the support received from right hon. and hon. Members on both sides of the House.

The Bill makes important and comprehensive reforms to stamp duty land tax on residential property. The move from a slab to a slice system will cut SDLT for 98% of people who pay the tax—99% in Scotland, Wales and Northern Ireland, and 91% in London. It will reduce distortions in the housing market and will be of particular benefit to first-time buyers and those making the first few moves up the housing ladder. It will ensure that nobody paying up to £937,500 for their home will pay any more SDLT than they would have done under the rules as they applied on 3 December last year.

The aspiration to own the place one lives in has been the driver of Britain’s prosperity for centuries. SDLT is an important source of Government revenue, raising £6.5 billion in 2013-14 to pay for the essential services Government provide and support, but as a tax it must be imposed fairly and reasonably, and to put it quite simply, it has not been until now. These reforms will boost people’s aspirations and, critically, ensure that SDLT is paid in a fair and applicable manner that minimises avoidance. They are part of a much wider suite of Government measures designed to get Britain building the homes it needs. Almost 217,000 affordable homes have been delivered since April 2010 and between 2011 and 2015 some £19.5 billion of public and private investment is going into affordable homes, putting us on track for the highest rate of affordable house building for at least two decades. A family buying a Help to Buy property at the average cost of £185,000 will be £650 better off as a result of the reforms—a significant sum, especially at a time when cash is most likely to be tight.

I welcome the efficient and effective debate we have had so far so. The measures will make a tangible and positive difference to the lives of people up and down the country, which has been recognised and welcomed by Members on both sides of the House. I hope that Members will see fit to read this Bill a third time and to pass it.

I thank the Minister and echo his thanks to Members from both sides of the House for the efficient debates we have had on the Bill, which, as he noted, has had support from across the House. He is right that the slab structure of SDLT was very unpopular. It was subject to regular criticism, and Ministers and shadow Ministers have long been lobbied for change. The Institute for Fiscal Studies described it as

“one of the worst designed and most damaging of all taxes”,

so it is good to see some change, especially given the huge increase in house prices that led to the burden of stamp duty rising significantly.

I am grateful to the Minister for answering the questions I put to him, particularly those on dealing with the differential treatment of commercial and residential property. Sometimes the way in which the Minister says, “We keep all taxes under review,” hints that some change might be in the offing or that no change will happen at all on his watch. I could not work out which applied today, so at the very least I am sure he has made his officials very happy.

I welcome the measure. Notwithstanding the figures on house building that the Minister gave at the tail-end of his speech, I place on record our continuing concern that the Government have not done enough to deal with the biggest housing crisis for a generation. We need a much more active approach to housing supply, rather than dealing with demand-side issues, but those are debates for another day. The changes to stamp duty are welcome and we are happy to support them.

I, too, support the Bill because it is a move in the right direction. I strongly welcome the decision to get rid of the slab structure, against which I and others have lobbied strenuously for some time, and it is good that the Government have listened.

However, given that many of us believe in the virtues of home ownership, it is a pity that we still need a tax on home ownership at all. I welcome the fact that it is now lower, but I do not welcome the fact that we still seem to need a tax on home ownership. It is a great pity when we have to tax good aspirations in our community. Many of my constituents are now fortunate enough to own their own home, but there is a new generation who wish to do so, and this is still a high tax on them which they have to find a way of financing.

I hope that in future Budgets, as the long-term economic plan produces its magic and as we get rid of the deficit, we can return to this tax. The rates are still very high and it is a tax on one of the most essential things that families need. They need shelter; they need housing. The preferred type of housing for most people in our country is to own their own home, and this is still quite a large tax on home ownership. I know that the Minister and his colleagues are working away to ease the burden wherever they can in the straitened financial times we live in, and I know that they have a number of schemes to promote home ownership.

I urge my hon. Friend to do everything he can to promote home ownership because owning that first home makes such a difference to people’s lives. It gives them something to be proud of and it means that they can look forward to an old age not facing a rent bill, when they have at last repaid the mortgage and can truly call their home their own. It is very galling for them if a big chunk of the mortgage is paying Government taxes, so I welcome this small step to make home ownership a bit more affordable.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Consumer Rights Bill (Programme) (No. 3)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Consumer Rights Bill for the purpose of supplementing the Order of 28 January 2014 in the last Session of Parliament (Consumer Rights Bill (Programme)), as varied by the Order of 13 May 2014 in that Session (Consumer Rights Bill (Programme) (No. 2)):

Consideration of Lords Amendments

(1) Proceedings on consideration of Lords Amendments shall (so far as not previously concluded) be brought to a conclusion three hours after their commencement at today’s sitting.

(2) The Lords Amendments shall be considered in the following order: Nos. 12, 1 to 11 and 13 to 78.

Subsequent stages

(3) Any further Message from the Lords may be considered forthwith without any Question being put.

(4) The proceedings on any further Message from the Lords shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.—(Jo Swinson.)

Question agreed to.