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Know any housing associations with hundreds of thousands of pounds to spare? No, neither do I. That's why it's so unfortunate that the resurrection, or re-enforcement if you like, of the 1891 Stamp Act could cost housing associations just that amount (20 June, page 10). It also jeopardises the practice of leasing property for homeless people and means delays and extra costs for landlords taking civil action against tenants.

Stamp duty is a tax on documents and applies to all tenancies, public and private, and to all social landlords, local authority or housing association.

It applies to both the primary document, held by the tenant, and the counterpart document, held by the landlord. There are some exemptions from stamp duty but these apply only to tenancies granted to charitable registered social landlords.

Stamp duty is often called a "voluntary tax". No one will come knocking on your door for it. However, if you want to have the tenancy document you hold protected in law, and avoid financial penalties and interest at a later date, then you should get it stamped. Section 14 of the Stamp Act makes it clear that unstamped documents cannot be presented as evidence in civil proceedings, such as repossession cases, and that unstamped documents cannot be officially registered. And if your duty is overdue, you face quite prohibitive penalties and interest.

Who has to pay?
Stamp duty is based on the average annual rent, net of service charges (not reserved as rent) and the primary duty (1%) is payable by the tenant.

For tenancy agreements made before March 2000, stamp duty applies where the rent is more than £500 a year. Virtually 100% of tenancies are caught and, more to the point, will still be caught by this £500 threshold. After much lobbying by the National Housing Federation, the threshold was increased to £5000 for tenancy agreements made since March 2000, and this covers 1% of general needs and 6% of supported housing tenancies.

The taxman awakens
Until 2000, the requirement to pay stamp duty had been disregarded by all concerned – landlords, tenants, the Inland Revenue and, not least, the courts.

About that time, the bar council reversed a convention that had existed since 1956 which held that it was unprofessional for their members to object to non-payment.

The threshold was increased from £500 to £5ooo and, at the same time, the Inland Revenue became much more enthusiastic about invoking its new penalty regime, introduced the previous October.

The federation warned its members and recommended that new tenancy agreements above the threshold should be stamped.

Two registered social landlords each face bills of £250,000 next year for stamp duty and penalties

Following that, very little, if anything, changed. The general disregard continued.

T0wards the end of 2001, judge Nic Madge began to apply the law in West London court, refusing to accept unstamped documents in evidence in cases of repossession, resulting in delays and penalties and interest being imposed by the newly enthused Stamp Office.

It's a London thing
This spread to some neighbouring courts but to date remains fairly local, although I have heard of similar goings-on in south London.

Since problems began to emerge a few months ago, the federation has held discussions with government departments, legal advisers and members to minimise financial damage to our members and, in the longer term, to exempt social landlords from this iniquitous tax on shorthold tenancies.

We have advised our members to use proper counterpart documents – our website gives advice on avoiding potential pitfalls – and to think ahead and make sure they pay what they need to before cases reach court.

We are particularly involved in finding urgent remedies for our members involved in housing homeless people, where the necessary legal process and the level of rents are jeopardising housing association involvement in what is a key plank of government housing policy. Two of those members are each facing bills for stamp duty and penalties of £250,000 over the next year.

Rallying to the cause
We have engaged with the Housing Corporation and the Office of the Deputy Prime Minister to rally support. The Inland Revenue has agreed to look at a legal opinion which questions the legality of applying duty to shorthold periodic tenancies and is receptive to overtures to find pragmatic solutions, especially on the homeless issue.

We are represented on the Inland Revenue's lease duty subcommittee as part of its consultation on modernising stamp duty and where our aim is to seek exemption for the kind of tenancies used by social landlords. We have pointed out that the maximum contribution to Treasury coffers under normal circumstances would be £50k a year – that's less than one-thousandth of 1% of the total duty collected.