It’s fair to say there’s been no shortage of drama in Westminster in recent years. Brexit, snap elections, votes of no confidence and more political scandals than you can shake a stick at.
The latest saga last week saw deputy prime minister Angela Rayner forced to resign from government after admitting to underpaying stamp duty land tax (SDLT) when purchasing her £800,000 second home in Hove.
Rayner’s case centred around the transfer of the ownership of her existing main residence in Greater Manchester into a trust for her disabled child.
She said that she believed, based on the advice she received, that the lower rate of SDLT would apply to the Hove property.
Labour’s poster girl now finds herself on the back benches of the very party many once tipped her to lead
However, the prime minister’s standards adviser Sir Laurie Manus said Rayner was twice informed that the advice she received did not constitute expert tax advice.
In both cases, it was suggested or recommended specific tax advice be obtained.
Manus added that: “If such expert tax advice had been received, as it later was, it would likely have advised her that a higher rate of SDLT was payable.”
Rayner chose not to. And as a result, Labour’s poster girl now finds herself on the back benches of the very party many once tipped her to lead.
The stamp duty legislation, contained in the Finance Act 2003 schedule 4ZA, sets out the rules for when people buying a house need to pay “higher rates for additional dwellings” – a surcharge levied on purchases of second homes since 2016.
Once Manus delivered his verdict that Rayner had broken the ministerial code, the writing was on the wall
Rayner’s own government increased this surcharge from 3% to 5% in last year’s Budget, so many will say she simply should have known.
Amid the fallout, Rayner insists she consulted her lawyers over the purchase and has been badly advised.
However, conveyancing firm Verrico & Associates vehemently deny this, insisting it has done everything “correctly and in good faith”.
Whether it was through oversight, lack of knowledge or ignorance on Rayner’s part, once Manus delivered his verdict that she had broken the ministerial code, the writing was on the wall. She simply had to go.
A housing secretary underpaying SDLT is not a good look for Labour and made her position untenable.
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This turn of events only highlights the importance of getting proper advice on complex financial matters – and the devastating consequences when one doesn’t.
Rayner certainly isn’t alone.
Phil Blackburn, tax partner at chartered accountants and business advisors Lubbock Fine, says that HMRC is “very alive” to the problem of individuals underpaying stamp duty land tax on the purchase of second properties.
He adds that in total, HMRC believe wealthy individuals underpay as much as £109m in SDLT each year.
HMRC estimates that there has been an overall SDLT gap of around £275m in the past year alone.
Stamp Duty Land Tax is notoriously complex, particularly when the nuances of trusts and higher-rate liabilities are involved
If reports are to be believed, Rayner is likely to face a hefty penalty of anywhere between £8,000 and £12,000.
But for Rayner, the cost is more than just a fine from HMRC. Her reputation and political future are now in ruins, and she’s been left to lick her wounds and pick up the pieces of her career.
Ultimately, she paid the price for not seeking the right type of advice.
As David Smith, property litigation partner from London law firm Spector Constant & Williams, says: “Stamp Duty Land Tax is notoriously complex, particularly when the nuances of trusts and higher-rate liabilities are involved.”
Rayner’s spectacular demise is almost as dramatic as her meteoric rise through the ranks of the Labour Party.
Rayner’s demise should serve as a wake-up call to anyone without expert knowledge attempting to do it alone
The girl, who grew up on a council estate in Stockport, left school with no qualifications and became a single mum at the age of 16.
Her ‘rags to riches’ story is what has endeared her to many. The embodiment of a working-class hero defying all odds to make it to one of the top jobs in politics.
But just 14 months after the elation of Labour’s landslide election victory, Rayner has gone from the highest of highs to the lowest of lows.
Her demise should serve as a wake-up call to anyone without expert knowledge attempting to do it alone.
While others may not have to endure the same public humiliation she has, it’s a reminder there are few topics more complex than the law of trusts.
