Until 1997, stamp duty on property transactions was charged at only 1%. Duty at that level was generally regarded as an incidental expense of buying property and it was unusual for the parties to enter into complex mitigation arrangements to avoid it. This changed dramatically following the steep increase in stamp duty rates in the late 1990s, culminating in the introduction in March 2000 of a 4% rate for transactions of more than £500,000.
This quadrupling of the rate of stamp duty had a significant impact on the commercial property market. The stamp duty burden had a major effect on the pricing of deals – and their feasibility – and led to a thriving stamp duty mitigation industry. With stamp duty rates that high, it was worth investing significant amounts in legal costs to mitigate an expensive and essentially still voluntary – in the sense that there is no legal obligation to pay it if it is not necessary to do so – tax.
