Bull said the Conservative manifesto, setting out the party’s policies in the run up to the UK general election hints at a possible tax on land if British prime minister Theresa May is elected back into office on 8 June.
He refers to a passage in the manifesto, which states “we [the Party] will work with private and public sector house builders to capture the increase in land value created when they build”.
“That’s a land value tax,” said Bull, revealing that the last time a land value tax was mooted was in the mid-1970s.
“Since the early 1990s, HMRC has reviewed the possibility of introducing a land value tax. At its simplest, this would tax the uplift in value enjoyed by landowners when they sell sites for development,” adds Bull.
The tax expert pointed out that a levy on land could also tax existing property occupiers whose properties increase in value because of improvements in local infrastructure although it’s unlikely it will result in a discount for those occupying properties whose “value fell because of a new dual carriageway running past their front doors”.
Bull said it’s still unclear whether the Conservative manifesto proposal will “usher in a national land value tax”, or whether it will just require developers to undertake limited infrastructure work.
He believes that if the land value tax targets the gain made by the landowner who sells a site for development, then it will strike at a “key component of the existing business model for house-building and could have a significant impact on the future UK housing landscape”.
Latest polls suggest Britain is on course for hung parliament, as the Conservative lead over the opposition Labour Party has continued to narrow in recent weeks.
It comes as May faced backlash on the campaign trail earlier this month after unveiling the party’s flagship manifesto pledge to set a social care capital floor of £100,000 (€116,424, $129,396), above which taxpayers assets will be used to contribute to the cost of their long-term care in retirement.
Dubbed the ‘dementia tax’, Bull said the proposal will need a “serious amount of consideration to make it workable” to ensure that it is not “easily avoidable” and fits with the complex rules for inheritance tax.
“The key question will be at what point is the assessment made of what assets should be used to ‘repay’ the care costs? What if the elderly individual has already given away the assets – to the next generation or to trustees?
“Will there be a timeframe within which they still form part of the usable assets for the care costs? But what happens if the new owners don’t give access to the assets, have already disposed of the assets, have spent it or lost it on an investment?” he said.
“The principle of recovering care costs from an estate, while leaving a minimum £100,000 pot to pass on to the next generation, may be well intentioned.
“However, there will be much to consider within existing legal and tax rules to make this work. We might end up with very complex legislation around this, or the complexities may be seen as good reasons to quietly drop the proposal.”