Mansion Tax a 'threat to the traditional country house'

As the May general election draws closer, flaws in the proposed Mansion Tax are being seen in a sharper light.

There are concerns that its application would be indiscriminate, blunt – and unfair. As proposals stand it does not take regional property values, mortgage ratios, homeowner’s income or indeed their overall net worth properly into account.

In a rural perspective there are difficult calculations to be made in terms of what land/curtilage applies to the property itself and what applies to its related rural business or setting – whether this be agricultural production, parkland or designed landscape for example.

David Chismon, Director with UK top 20 Chartered Accountant Saffery Champness, and a member of the firm’s Landed Estates and Rural Business Group, sees real threats in the Mansion Tax proposals to this aspect of rural Britain and the rural economy. He says:

Whilst the Mansion Tax concept is designed to accrue benefit for HM Treasury from those who own expensive property, with the presumed, intended target being the London town house, there will be unintended consequences particularly through the rural sector.

We know that individuals are actively considering devaluing their properties to avoid Mansion Tax should it be introduced, reminiscent of the infamous 17th century window tax. Others may be concerned that sensible improvements to their properties will push them over a threshold into the tax net and so put off doing them.

However, even though Mansion Tax would be painful as an annual cash drain, deliberately lowering the value of an asset may cost more in the long run should the time come when that property may be put on the market.

The proposals appear to ignore any mortgage secured against the property and although there are proposals to allow a deferral of the tax until sale for those who do not have sufficient income (such as pensioners) this will feel like a very unfair tax for those having to do so.

Mansion tax is indiscriminate, and fails to take into account the collective worth of all properties in the same ownership, not to mention other assets, owned by a single individual.

The tax would hit hard those properties that have increased substantially in value since the time of purchase simply due to the rise in the property market - it is thought that a third of properties affected will have been owned for more than 10 years.

Finally, the system will rely upon regular valuations - presumably funded by the owners - which will inevitably lead to disputes over professional judgment in marginal cases.