News and Insights

Published in the JEP's Homelife supplement - February 2022

'Nothing is certain except death and taxes.' That famous quote was written by Benjamin Franklin in 1789. It is an enduring saying because we all know these things are certainties.

Everybody understands income tax and knows about GST but most will only experience stamp duty maybe once in their lives. So what is it?

History
Stamp duty is an ancient method of raising money from commerce. Today we think of it as a tax on property transactions but, historically, it was more extensive. It is thought to have been first implemented in Venice in 1604 and introduced in England in 1694 with the following Act of Parliament explanation:

'An act for granting to their Majesties several duties upon vellum, parchment and paper, for four years, towards carrying on the war against France.'

It was extremely successful. Initially, it was a tax on legal documents to do with contracts or the transfer of assets. The document would not be valid unless stamped and would only be stamped if the tax was paid there and then. In England, it began as a fixed-rate charge for particular types of transaction. In the late-18'h century, it evolved to become a tax which changed in value depending on the value of the transaction: the more expensive the transaction, the greater the tax. It was extended to be a tax on the sale of newspapers, hats, paper, mittens, hair powder etc. It subsequently became a tax mostly for property transactions.

What happens in Jersey?
Stamp duty in Jersey is applied to contracts for the sale of land, the registration of wills-including gifts of land - and upon the application for a grant of probate for a movable will. The tax is attributed in bands, which increase depending on the value of the property (both immovable and movable). The more expensive the property, the greater the stamp duty charged on either the will or the contract.

The property which recently sold for £31 million would have attracted a stamp duty of over £3 million.

There is no time allowed to pay the tax. It must be paid before the transaction completes or upon the application for a grant of probate or the registration of a will, otherwise the contract would be refused by the Court.

Is it always expensive?
The answer is no. The rules for the calculation of stamp duty are complicated. Your lawyer will be aware when the tax is not charged at the full rate. There are concessions for first-time buyers (a 'first-time buyer' is someone who has not owned land anywhere in the world) but this only applies to a threshold of £450,000. Different rates apply to residential and commercial properties (residential is more expensive) and there are discretionary discounted rates when a property is transferred to joint names from sole names where the parties are married.

Wills
Historically, stamp duty was a disincentive to the registration of immovable wills. Few were registered because not many were willing to face the large bill. However, as time passed, there became uncertainty as to who the real owners of properties were and immovable wills became registered, often as a matter of course. The stamp-duty rules have now changed so that if the heirs are the same as they would be on an intestacy, a nominal fee is charged.

Stamps and stamp duty
In Jersey, stamp duty used to be real stamps which were bought from the Treasury Department in denominations of up to £500 and then stuck on the back of contracts. That system was still used until recently. The administration has now moved online.

Concessions and increases
Stamp duty is not simply a method of collecting revenue. It can also be used as a method to seek to alter market forces. There is a proposal which will soon become law for purchases of buy-to-let properties to be charged a higher rate. The aim of the measure is to make properties more expensive for investors and preserve them for buyers setting up a home. Time will tell whether this strategy works.

Stamp duty is not always an easy subject to deal with so it is recommended that you seek advice from your lawyer. In addition, on the Viberts' website, you will find a stamp-duty calculator that will help you to determine what duty is payable in relation to property purchases, the registration of immovable wills and grants of probate for movable wills.