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Any Tax Experts? How to Reduce Stamp Duty?

cutthroat_jake Avatar
9y, 9m agoPosted 9 years, 9 months ago
Hi Peeps,

Does anyone know of any (preferably legal) way to reduce the amount of stamp duty payable on a house, purchase price £270,000?

At 3% (over £250,000) it works out at a whopping £8,100 for Gordon Brown and his cronies!

:pirate: CJ :pirate:
cutthroat_jake Avatar
9y, 9m agoPosted 9 years, 9 months ago
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(19) Jump to unreadLocked
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#1
Squat, lol
#2
birdyboyuk
Squat, lol


I tried squatting whilst looking at the cheque, but it looked even scarier, and before you say, I tried squinting too.

:pirate: CJ :pirate:
#3
cutthroat_jake
I tried squatting whilst looking at the cheque, but it looked even scarier, and before you say, I tried squinting too.

:pirate: CJ :pirate:

lol, well, im afraid I can't help you. I have no clue whatsoever on buying a house! Hope you find an answer tho! :thumbsup:
banned#4
Try and agree with the seller to take 20K as a "gentleman's agreement".
#5
JDeal
Try and agree with the seller to take 20K as a "gentleman's agreement".


Yeah, I'd read about that "dodge", but I was advised that the Inland Revenue are very keen on stopping this now. You are automatically investigated if the "fixtures and fittings" come to 10% or more of the purchase price.

Thanks for the idea though.

:pirate: CJ :pirate:
banned#6
Thats why it is a "gentleman's agreement", if you did the fixtures and fittings way it is a lot of hassle. You could either just offer them 20k cash, or threaten to knock them down 5k unless they pay half (or the 2k you would save) of your stamp duty.
#7
yes but the discount in this case isn't 10% (it is less) and this could be legitimate. Wht is there? A nice fridge freezer, oven, w.machine and tunmbler, curtains curtain rails, lights, a shed (the last people we bought from took it!!) a hot tub (I have seen a few houses with these?) - all sorts of things. your solicitor should be able to advise what can be covered and whether it is legitimate in this case.
1 Like #8
cutthroat_jake
Hi Peeps,

Does anyone know of any (preferably legal) way to reduce the amount of stamp duty payable on a house, purchase price £270,000?

At 3% (over £250,000) it works out at a whopping £8,100 for Gordon Brown and his cronies!

:pirate: CJ :pirate:

First of all check the following website to see if the property you are buying is in a 'disadvantaged area'.

http://www.hmrc.gov.uk/so/dar/dar-qualifying.htm

Or search by postcode here

http://www.hmrc.gov.uk/so/dar/dar-search.htm

At that sort of price I would guess not but, there are some strange results and you might be lucky.

If its not in a disadvantaged area then can I ask if you are buying from a housebuilder? i.e is it a new house?

If it is the easiest option is for them to reduce the price to £250,000 and give you £20,000 less on your part ex. Builders are obviously reluctant to advertise this fact but, I advised a colleague at work to do this and to his suprise the builder agreed!
#9
pluves1
First of all check the following website to see if the property you are buying is in a 'disadvantaged area'.

http://www.hmrc.gov.uk/so/dar/dar-qualifying.htm

Or search by postcode here

http://www.hmrc.gov.uk/so/dar/dar-search.htm

At that sort of price I would guess not but, there are some strange results and you might be lucky.

If its not in a disadvantaged area then can I ask if you are buying from a housebuilder? i.e is it a new house?

If it is the easiest option is for them to reduce the price to £250,000 and give you £20,000 less on your part ex. Builders are obviously reluctant to advertise this fact but, I advised a colleague at work to do this and to his suprise the builder agreed!


Thanks for the info pluves. Very interesting.

Unfortunately, the house is not new, about 4 years old, and it doesn't fall into the "Disadvantaged Areas" category.

Cheers Anyway.

:pirate: CJ :pirate:
1 Like #10
Fixtures and fittings route seems like your best option. A decent solicitor should be able to get £20k of fixtures and fitting included in a £270k property purchase. Its only 7.4% of the asking price and well below the 10% level which HMRC might be interested in.

Hopefully your potential new house has lots of built in appliances which are quite expensive nowadays!

Edit:

I've just done a quick summary based on our last property purchase and all these are genuine fixtures and fittings which would have to itemised seperately if we sold property
Aerial
Satellite Dish
Immersion heater
Hot Water cylinder jacket
roof insulation
Fire and fireplace
Burglar alarm system
Complete central heating system
Extractor fans
Doorbell
Door furniture
Double glazing
window fitments
curtain rails/poles
pelmets
blinds
Carpets and any other floor covering in all rooms
Kitchen fitments such as extractor hood, oven, hob, spice rack etc
Washing machine
Dishwasher
Cooker
Bathroom fitments such as towel rails shelves and sanitary fittings
Shower and fittings inc curtain
Garden shed
etc etc

Shouldnt be too hard to get to £20k with all the above. Seperate transaction though so your solicitor is likely to charge a little more - nothing like £5400 which is the difference between 1% and 3% rates.

Another ripoff tax from Blair and Co. When you buy shares the rate is fixed at 0.5% irrespective of size. Paying more tax cos your house is worth more is daylight robbery. Nearly £7 billion they collected last year and such an easy tax to collect.
#11
Thanks for this advice Pluves1, I too am looking to buy a house at the same £270k bracket. I'll definitely go though a list of items like yours, to see what we can class as fiittings etc.

Rep added.

Steve
#12
I'm in the same boat. We've agreed a sale price of £13k over the stamp duty threshold. I'd love to be able to drop into the lower bracket.

How would you suggest going about it? Speaking to our solicitor first and then the vendor?
#13
From my experience most solicitors wouldnt even contemplate doing it, maybe up to £5,000 not £20,000 for fixtures and fittings. Recently
I had my land ajoining my house for other reasons split, ( a neighbour wanted to buy a bit ), and then my house has been sold for just under £250,000 and I also made money from the land so the actual money i came out with was quite a bit over the £250,000 mark...
It costs about £40 plus a small amount of solicitors fees to change the deeds to change a bit of land on your property and then you or your vendor can sell the two parts seperately, this is a LEGAL way to do it.. But the main thing is to casually ask your solicitor ( off the record ) and also get the vendor on board as I am sure if you make it worth their while they will be interested. Also when you come to sell it may be worth while having it split for your next buyers so you can do a simular deal.
I hope this helps someone :thumbsup:
#14
superdealer
From my experience most solicitors wouldnt even contemplate doing it, maybe up to £5,000 not £20,000 for fixtures and fittings. Recently
I had my land ajoining my house for other reasons split, ( a neighbour wanted to buy a bit ), and then my house has been sold for just under £250,000 and I also made money from the land so the actual money i came out with was quite a bit over the £250,000 mark...
It costs about £40 plus a small amount of solicitors fees to change the deeds to change a bit of land on your property and then you or your vendor can sell the two parts seperately, this is a LEGAL way to do it.. But the main thing is to casually ask your solicitor ( off the record ) and also get the vendor on board as I am sure if you make it worth their while they will be interested. Also when you come to sell it may be worth while having it split for your next buyers so you can do a simular deal.
I hope this helps someone :thumbsup:

£5000 for fixtures and fittings seems a bit low. The flooring alone in my house would nearly total that!

You would normally have to ask your solicitor to do this seperately - they will do it. Just that they will charge a little extra.

As for splitting off house and land that can only work if you're selling to two seperate vendors and they are completely unconnected. This wont work if you're selling to the same vendor. Below is an extract from a taxation book and is certainly something HMRC would look very closely at.

Mortgages
Where a property is mortgaged, if it (or a share in it) is gifted to another person, they are deemed to take over their share of the mortgage, and that is “valuable consideration” for SDLT purposes. For example, if Mr A owns a buy to let property worth £400,000, on which there is a mortgage of £300,000, and he gives a half share in the property to his wife, there is no CGT to pay because gifts between spouses are free of CGT, but his wife will have to pay SDLT. Having taken over half the mortgage (£150,000), she is deemed to have “paid” that for her half share in the house, and SDLT at 1% (£1,500) is due.

Linked transactions
This is a typical piece of anti-avoidance legislation, in that it is designed to attack one form of abuse, but has the side effect of producing unfair results.

First, the abuse. If I want to buy a house costing £300,000, the SDLT will be £9,000 (at the 3% rate). But what if the vendor sells me the house for £250,000 (SDLT at 1% of £2,500), and sells the garden to my wife for £50,000 (no SDLT as it is below the threshold of £125,000)?

Unfortunately, because these two transactions are “linked” – they are part of the same bargain and the two purchasers are “connected” with each other – the rule says you must add the consideration for each transaction together, and then everyone must pay SDLT at the rate for the total – so in this case I pay £7,500 (3%) and my wife pays £1,500 (also at 3%).

That, I suppose, is fair enough, as the splitting of the sale was merely a trick to avoid SDLT, but consider this case:

Jack and Jill each own a flat, and by coincidence their flats are each worth exactly the same - £200,000. Jack’s flat is in Manchester, and Jill’s in Birmingham. They have never met, but they work for the same large organisation. One day, Jack gets transferred to Birmingham, and Jill gets a transfer to Manchester. They advertise their flats in the company magazine, and eventually agree to do a straight swap. For SDLT purposes, the “consideration” in each case is the value of the house swapped, so they each pay SDLT of £2,000 (the 1% rate).

If the facts were exactly the same, except that Jack was married to Jill’s sister, Jack and Jill would be “connected” and so the two transactions would be “linked”. This in turn means that the total consideration for the two transactions must be used to decide the rate of SDLT. The total is £400,000, which is in the 3% band, so Jack and Jill each have to pay SDLT of £6,000 (£200,000 at 3%).
#15
Loobydoo

Speak to both the vendor and solicitor and explain why you want to split the fixtures and fittings. The vendor will have to warn their solicitor and dont forget that they may be charged extra - you can offer to pay their costs. Your solicitor (if they're any good!) should have no problem doing this so long as there are genuinely fixtures and fittings to the value of £13k in the property. The vendor and you will need to agree the value of the fixtures and fittings and these will be itemised seperately. If you have any high value items (such as wooden flooring or fancy cooker or fridge freezer) I would suggest that you take photos of the items (subject to the vendors permission) just in case of any dispute or contesting by HMRC. If the vendor has receipts for the items then getting copies will help your case if HMRC question your transaction.

Remember in the eyes of HMRC the onus of proof is upon you - not HMRC to prove otherwise.:?
#16
Having worked in a top law firm as a trainee solicitor for a year, before seeing the light, no half decent solicitor would be willing to say such a proportion of the purchase cost is actually for fixtures or fittings, as there has been a massive crack down on people trying to evade stamp duty. Consequently any solicitor or conveyancer would be risking their position if they were to over inflate the figures to try and find a way around the stamp duty issue to such an extent. In other words it would be more than their job is worth.

Hope that helps
#17
disagree - I don't think we are talking "inflated" figures. As pp said his floor alone cost over £5k so it is a question of fact as to what is in house - in many houses spending thousands on curtains is not unusual - see m-in-law for further information!!!
#18
Lockstockdude
Having worked in a top law firm as a trainee solicitor for a year, before seeing the light, no half decent solicitor would be willing to say such a proportion of the purchase cost is actually for fixtures or fittings, as there has been a massive crack down on people trying to evade stamp duty. Consequently any solicitor or conveyancer would be risking their position if they were to over inflate the figures to try and find a way around the stamp duty issue to such an extent. In other words it would be more than their job is worth.

Hope that helps

I agree with what you say but, in reality nowadays fixtures and fittings can all add up. I have never mentioned in any of my post overinflating the value of fixtures and fittings.
If it means the difference between stamp duty at 1% or at 3% then this is a legal and legitimate way of only paying stamp duty on the property and land etc - not on your fixtures and fittings which can be dealt with seperately and avoid stamp duty.
The list of fixtures and fittings is quite extensive and dont forget that this includes your central heating system boiler and other big ticket items as well.
#19
Thanks Pluves. Really appreciate the help.

I had a word with my friend who is a solicitor but not a conveyoncer. She agrees that I should have a word with the vendor to see if he's amenable to the idea, and then work out if the fixtures and fittings are worth £13k.

I'm hoping that they are as they've just had a new central heating system, loft insulation and are leaving an antique wood burning stove, some kitchen appliances and all of the flooring.

So fingers crossed and thanks for the idea!

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