The use of offshore vehicles is a practice that has been adopted in the UK for many years and which, as I know from personal experience, arose as a result of the hikes in the rate of stamp duty to 4% in the early 1990s. Until that time, the government had maintained the rate at 1%.

A 4% levy on the large capital sums involved resulted in it becoming cost-effective to set up and administer offshore vehicles, enabling the tax to be avoided. Prior to that time, most investors accepted that they had to pay 1% stamp duty on completion and allowed for that in their financial calculations. The use of offshore vehicles was not worth the cost or the administrative hassle.

There is a simple solution to the tax avoidance issue: reduce stamp duty to 1%. The likely consequences are that there would no longer be an advantage in setting up offshore vehicles and the Treasury would receive 1% of the value of many of the UK’s commercial property transactions – a not-insignificant sum.

After all, receiving 1% of something is better than not receiving anything at all.

Andrew J Martin