Chancellor Gordon Brown has frozen the stamp duty on houses and commercial properties, but cracked down on non-payment.

He has introduced a review of the stamp duty paid on commercial properties as part of a series of 'anti-avoidance' measures.

The move is designed to tackle the large proportion of properties on which no stamp duty is paid.

Gordon Brown said as a result of tax avoidance, only half of all large commercial property transactions - for example when a house is sold along with a business - are paying the stamp duty owed.

Consulting businesses

Mr Brown said because tax avoidance and distortions could take the form of leasing, the finance bill would look to restructure the stamp duty currently paid on the rental value of all new leases.

RESIDENTIAL STAMP DUTY CHARGES
Property Value	Up to �60k	�60k to �250k	�250k to �500k	More than �500k
Stamp Duty	0%	1%	3%	4%

Source: Council of Mortgage Lenders

Under the new proposals, tenants will pay 1% of the net value of rental payments due for the length of the lease - as long as this is more than �150,000.

The new rate will come into effect from 1 December, after consultation with businesses.

But the idea has already sparked criticism.

"A rate of 1% over the lifetime of a lease will add significantly to the lease duty currently paid by those renting commerical property," said Louis Armstrong, chief executive of the Royal Institute of Chartered Surveyors (RICS).

The Chancellor would like to see more long term fixed rate mortgages being taken out Brown is tackling Britain's housing market

The chancellor said if the proposed change goes ahead, he would increase the exemption from stamp duty for commercial property from �60,000 to �150,000 and exempt leases up to �150,000.

This, he said, means there will be no duty on 60% of commercial rental contracts.

Accountants at KPMG questioned the move.

"The Inland Revenue has justified this on the basis that leases are used as an avoidance device," said tax partner Steve McGrady.

"It is wrong, however, to say that all leases are used as an avoidance device."

Islamic help

A welcome change to stamp duty was the reform on Islamic mortgages which had previously seen stamp duty paid twice.

Islam forbids the payment or receipt of interest, meaning that Islamic mortgages require a financier who buys the property then sells it on to the buyer and collects instalment payments.

Only once the full balance is paid does the original buyer own the property.

The Council of Mortgage Lenders (CML) said:

"The excellent work being done by the industry, regulators and government departments to reduce the barriers to Islamic mortgages shows that where there's a will there's a way."

However, the CML criticised the chancellor's decision to freeze stamp duty as "disappointing", saying there was "no other help for first time buyers".

The CML had been looking for the current �60,000 limit on stamp duty to be raised.