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We already have a conge (in effect a document duty) on conveyances, paid for by the purchaser. Just to clarify, is the Jersey system a document duty on a sale, payable by the vendor?

Somebody selling and then buying could then end up paying document duty on both transactions.

That’s not necessarily an obstacle, as its best to look at the overall quantum, but maybe it would help people struggling to get onto the property market if (a) it was only levied on the seller, with conge then abolished for buyers, and (b) there was a suitable exemption threshold to remove lower-value properties from the tax. Something like a 3% or 4% duty on sales over £400,000, with nothing payable on purchases, might be worth looking at.

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1) I see your point although I wouldn’t have described it quite that way because a property could potentially be worth less than its original cost.

2) Correct

3) I agree that 20% needn’t be sacrosanct – it just seems to be that way. But GST could be a lot less palatable!

4) Anti avoidance law can deal with that.

5) I was taking as read that the current cost reduction disciplines of our politicians would continue!

I can relate to your sentiment, but that’s the way tax works pretty much the world over, and our current system isn’t raising enough tax. I just think that its the lesser of the various evils once its accepted that higher taxes are unavoidable.

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2) yes so in your example this tax would cost them £100k of what they would have otherwise received.

3) We’ll have to agree to disagree. I actually think changing the headline rate is not sacrosanct but would need to take careful consideration of allowances at the same time.

4) Not if it’s held by a company and the ownership of the company changes …. I think the cost is higher than you make out but I agree the income would most likely be far higher.

5) I do believe you, I don’t think anyone in Guernsey really supports RM …. except maybe Arnald :)But that diverts from the point I was trying to make …. this would probably raise too much tax and make deputies lives to easy to go on a spending spree. e.g. if they have it, they will spend it (and then some!!)

I guess I’m comming at this from too much of a personal angle. I wan’t to be able to leave my estate (and hopefully good memories) to my family (unless the p*ss me off before then) rather than have them take out mortgages (no matter how big) to receive their inheritance. I have already paid tax on the money needed to buy my property and Guernsey does not have cgt or iht. These are sacrosanct to me.

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I’m not sure how you reach those conclusions.

1) IHT is payable on value not on growth, so it bears no correlation to CGT.

2) How can it possibly impose “cost” on the next generation – they are only having to pay 10% of the value of what they are being given. So instead of receiving a “gift” worth £1m, they are receiving a “gift” worth £900k. Its just a smaller gift!

3) Keeping it simple and using existing taxes only works when its easy. Is it easy to raise existing tax rates when the 20% income tax rate seems to be sacrosanct? Nobody likes to pay more tax, and what I’m suggesting is the lesser of the evils. A property IHT or GST?

4) Really not that difficult or costly to implement. All land in Guernsey needs to be conveyed.

5) Believe me, I’m one of Murphy’s biggest critics! I’m just realistic enough to appreciate that “easy” won’t work, and that we are going to have to pay more taxes. Finding the “least bad” options is surely a good objective?

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1) IHT is a form of CGT
2) It bequeths (sp?) cost on future generations
3) We shouldn’t be looking at introducing new forms of tax but working with existing methods (keep it simple)
4) Don’t under estimate the costs …. new legislation, extra tax staff, cost of valuing each property (fairly), cost of closing loopholes.
5) Just because we could raise revenue (could be said for any form of taxation really), doesn’t mean we should. Easy ways of raising tax revenue which could bloat the government and divert them from being frugal with our money is very much from the Richard Murphy school of thought.

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The first one is easy – transfers between spouses should be exempt, as is common in many jurisdictions re IHT.

As far as company-owned property is concerned, there would need to be appropriate legislation to cover it but yes, taxing inheritances of shares in property owning companies would need to be caught.

In the third case, it would be logical to levy the tax when the lifetime enjoyment comes to an end. In the UK there are mechanisms to place values on lifetime enjoyment interests for IHT and CGT purposes.

I doubt that we would come across any scenarios which haven’t already been addressed eleswhere.

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1) Husband has the deeds to the house and dies leaving it to his wife. His wife, whilst not on the deeds, has probably contributed to the purchase of the house, should she be taxed ?

2) Houses currently held by companies, should this IHT be extended to share holdings that may be inherited ?

3) Selling the house for £1 prior to death with a lifetime enjoyment clause. Used to be common to avoid the house being sold to pay for old age care (not sure if you can still do this).

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1. I agree. Everything should stand on its own merits.

2. Then they or you haven’t understood what I’ve suggested. I can fully understand that a general IHT on their wider assets would be a complete turn-off. That is not what I am suggesting.

3. Nothing to do with morals at all. Immovable property in Guernsey is very easy to collect tax on. Movable property is not. There is no point in ever imposing a tax which costs a disproportionate amount to collect.

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Welcome to the real world, where that’s exactly what happens just about everywhere else. And I’m talking about a very modest 10% – not 40% or 50%.

Why would it drive away the ultra-rich? Somebody from the UK worth £100m can avoid £40m (40%) of UK IHT by being domiciled here instead. If they have a £3m house here, they would pay £300k maximum Guernsey IHT under my idea. Now let’s see – £300k on death in Guernsey or £40m on death in the UK – that’s a tough one. It would only be an issue of the IHT applied to assets other than Guernsey real estate.

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Correct – the Guernsey real estate inherited is worth £1m regardless of who owned it, so they get the tax same liability in relation to that asset – £100,000. That’s pretty much how inheritance tax on real estate is taxed the world over – although usually at far higher rates than that! The fact that the “incomer” has other net worth of £20m is irrelevant. It may not even be Guernsey-situs wealth, so why would it be covered by a Guernsey inheritance tax on Guernsey rewl estate?

There is perhaps a good refinement to consider. In the UK, for example, the first £325k of a person’s estate is exempt from IHT, and the balance is payable at 40%. We could exempt the first (say) £450,000 of Guernsey real estate value (based on the average Guernsey house price), so that the tax is only payable on the excess. There is therefore a lot of people who it would not affect at all.

I really don’t understand your point in the last paragraph. Can you please explain? I don’t see how the heirs paying £100k tax on their inheritance (under my suggestion above it would only be £55,000 though) could have any such consequences. If the house is worth a net £1m, then why not simply borrow the £55,000 by way of mortgage so that the tax can be paid? A 5.5% loan-to-value mortgage is nothing.

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So, the family that inherits the ancestral farmhouse feels the full weight of your opprobrium because ‘they did not sweat blood and tears for it.’ But the feckless youth who inherits millions is allowed to enjoy all of it.

Your scheme would hit the middle classes, many of whom have little beyond their house. And it would protect the ultra wealthy. The Gini co-efficient would approach 1, displaying vast inequality in the distribution of wealth.
My old tutor would have awarded a gamma minus to your scheme.

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