ISLANDERS who have purchased secondary properties within a delayed Waterfront development and are struggling to meet stamp-duty hikes totalling thousands of pounds are being given extra time to pay the increased tax, the Treasury Minister has confirmed.
Deputy Ian Gorst yesterday sought to address concerns raised by buyers of some of the flats in the Horizon scheme, which is being constructed by the Jersey Development Company and which has suffered delays caused by Covid-19 and significant labour shortages.
During the Government Plan debate in December, the States Assembly agreed a 3% increase to the rate charged on properties other than main residences, such as buy-to-lets, which came into effect at the beginning of this year.
This means some buyers who are due to complete their purchase are faced with paying thousands of pounds more than expected when they originally signed the pre-sale contract several years ago.
In a letter to the editor, published on page 12, one such Islander, Sam Nolan, branded the change as a ‘retrospective tax charge’ that could do ‘immense damage to the reputation of the Island’ within the international finance community.
However, Deputy Gorst argued that the tax was not ‘retrospective’ and that ‘all sorts of things can change when one enters into a pre-sale contract’.
‘There was an in-principle decision in the Government Plan 2021 that was brought forward by the-then Corporate Services Scrutiny Panel, which said we should introduce an increased stamp-duty level for what we roughly think of as buy-to-let purchases,’ he said, adding that the legislative changes to the finance law were brought forward in December.
‘When you sign a pre-sale contract, you are not actually purchasing the house. The house purchase only takes place when you go through the Royal Court.
‘The stamp duty is applied at the point of the sale. So some individuals who had pre-sale contracts are saying “we don’t think that’s fair because we signed our pre-sale contract which said in effect we would buy it”, but the stamp duty is liable when it actually goes through court,’ he continued.
He said the government had received ‘quite a few emails’ from ‘dissatisfied’ buyers.
‘Some feel disappointed and that it’s retrospective – but it’s not retrospective because the stamp always applies when you go to court,’ he added.
He acknowledged that the financial circumstances of some buyers might have changed, adding that those with ‘cash-flow issues’ were being given three months to pay the additional 3%.
However, he noted that the value of many properties had increased ‘by a minimum of 60%’ – and in some cases ‘considerably more’ – in the same period.
‘It’s difficult to accept that in all cases [the issue] is around financial hardship but if there is that, to try and alleviate it, we are giving the additional three months to pay.
‘There was also another issue that arose which affected everybody who had entered into pre-sale contracts, and that was whether the stamp duty was liable on the pre-sale contract price or on the market value at the time the purchase went through the Royal Court,’ the minister continued.
He said he had issued an instruction for the pre-sale contract price to be used when assessing the amount of stamp duty liable to be paid – and that a further amendment would be brought forward to ‘clarify’ the legislation.
Deputy Gorst also disagreed with Mr Nolan’s comments about potential damage to the Island’s financial reputation.
‘Because we followed the normal process we would follow going through any tax change, I don’t accept that it’s bad for sending a mixed message.
‘All sorts of things can change when one enters into a pre-sale contract,’ he added.
