Buying a house & stamp duty avoidance?
09 September 2009, 02:48 PM
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Buying a house & stamp duty avoidance?
After a bit of free advise from the SN Massive. . .
Me & the missus are looking to buy another house in the region of 300k.
What are the potential work-arounds to avoid paying Stamp duty?
From memory a chunk of the house price can be absorbed into fixtures & fittings - but prob not 50k.
Is the stamp duty calculated on the total sale price - or if two (or more) parties were buying equal shares, would the stamp duty be based on their share of the property - rather than the value on the whole?
Thanks
Me & the missus are looking to buy another house in the region of 300k.
What are the potential work-arounds to avoid paying Stamp duty?
From memory a chunk of the house price can be absorbed into fixtures & fittings - but prob not 50k.
Is the stamp duty calculated on the total sale price - or if two (or more) parties were buying equal shares, would the stamp duty be based on their share of the property - rather than the value on the whole?
Thanks
09 September 2009, 02:58 PM
#2
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None, unless you are rich. After all, "stamp duty" is a rich tax (Really it is), you had to be wealthy to pay for the "duty", because you could not do it yourself then as most people could not write, on parchment (Expensive).
09 September 2009, 03:02 PM
#3
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After a bit of free advise from the SN Massive. . .
Me & the missus are looking to buy another house in the region of 300k.
What are the potential work-arounds to avoid paying Stamp duty?
From memory a chunk of the house price can be absorbed into fixtures & fittings - but prob not 50k.
Is the stamp duty calculated on the total sale price - or if two (or more) parties were buying equal shares, would the stamp duty be based on their share of the property - rather than the value on the whole?
Thanks
Me & the missus are looking to buy another house in the region of 300k.
What are the potential work-arounds to avoid paying Stamp duty?
From memory a chunk of the house price can be absorbed into fixtures & fittings - but prob not 50k.
Is the stamp duty calculated on the total sale price - or if two (or more) parties were buying equal shares, would the stamp duty be based on their share of the property - rather than the value on the whole?
Thanks
the tax man is quite hot on the fixtures and fittings thing
if you look at the land titles it maybe -- as sometimes is the case that a portion of the garden is under a separate title (but joined at the land registry)
it maybe possible to then buy each bit separately
09 September 2009, 03:30 PM
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Originally Posted by Times Newspaper
Stamp duty was first levied in the UK in 1694 to pay for the war with France. Although initially only planned for four years, it proved such a good earner for the government that it was never repealed.
At first the tax covered “vellum, parchment and paper”, but this was extended during the 18th and 19th centuries to cover a range of goods, including newspapers, insurance policies, gold and silver plate and even hair powder. The tax was extended to property sales in 1808.
In 1765, the attempted enforcement of stamp duty in English colonies in America led to protestor’s demands of “no taxation without representation” – and ultimately to the Boston Tea Party and the outbreak of the American War of Independence.
In 1797, William Pitt the Younger described stamp duty as "easily raised, pressing little on any particular class, especially the lower orders of society, and producing a revenue safely and expeditiously collected at small expense." He virtually doubled the tax that year.
In 1984 the Tory Chancellor Nigel Lawson eased the pressure on homebuyers by increasing the threshold for stamp duty on property from £25,000 to £30,000 and reduced the highest rate of stamp duty from 2 per cent to 1 per cent.
In 1991, during the last housing recession, the Conservative government temporarily suspended stamp duty for nine months on all properties worth less than £250,000 in an effort to boost sales.
But during the housing boom of the late 1990s/ early 2000s, when many more houses became liable for stamp duty, Gordon Brown came under increasing pressure to adjust the thresholds accordingly. In 2000-01, the Inland Revenue received £2.145 billion from residential stamp duty; in 2002-03, it received £3.59 billion.
In his 2005 Budget, Brown finally increased the zero rate stamp duty threshold from £60,000 to £120,000, and increased it slightly again in 2006 to £125,000.
But campaigners such as the Council of Mortgage Lenders (CML) want further reform to the controversial tax. The CML says that stamp duty unfairly constrains first-time buyers, places a greater burden on the south of England and encourages “price bunching” just below the thresholds. It favours a graduated structure that only charges higher rates of duty on the proportion of the property value above the threshold
At first the tax covered “vellum, parchment and paper”, but this was extended during the 18th and 19th centuries to cover a range of goods, including newspapers, insurance policies, gold and silver plate and even hair powder. The tax was extended to property sales in 1808.
In 1765, the attempted enforcement of stamp duty in English colonies in America led to protestor’s demands of “no taxation without representation” – and ultimately to the Boston Tea Party and the outbreak of the American War of Independence.
In 1797, William Pitt the Younger described stamp duty as "easily raised, pressing little on any particular class, especially the lower orders of society, and producing a revenue safely and expeditiously collected at small expense." He virtually doubled the tax that year.
In 1984 the Tory Chancellor Nigel Lawson eased the pressure on homebuyers by increasing the threshold for stamp duty on property from £25,000 to £30,000 and reduced the highest rate of stamp duty from 2 per cent to 1 per cent.
In 1991, during the last housing recession, the Conservative government temporarily suspended stamp duty for nine months on all properties worth less than £250,000 in an effort to boost sales.
But during the housing boom of the late 1990s/ early 2000s, when many more houses became liable for stamp duty, Gordon Brown came under increasing pressure to adjust the thresholds accordingly. In 2000-01, the Inland Revenue received £2.145 billion from residential stamp duty; in 2002-03, it received £3.59 billion.
In his 2005 Budget, Brown finally increased the zero rate stamp duty threshold from £60,000 to £120,000, and increased it slightly again in 2006 to £125,000.
But campaigners such as the Council of Mortgage Lenders (CML) want further reform to the controversial tax. The CML says that stamp duty unfairly constrains first-time buyers, places a greater burden on the south of England and encourages “price bunching” just below the thresholds. It favours a graduated structure that only charges higher rates of duty on the proportion of the property value above the threshold
09 September 2009, 05:28 PM
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10 September 2009, 11:19 AM
#8
IIRC you will have to sign a piece of paper warranting that the transaction is not part of a larger transaction that would take it over the stamp duty threshold. It is very difficult to argue that buying the garden and house in two separate transactions are not part of a larger transaction (ie. would it have made sense for you to buy the garden without the house or vice-versa).
A few years ago I bought the house next door to mine for £285k. We looked at whether we could buy part of the garden separately (on the grounds that it was between my house and my neighbour's house so made sense as a transaction in its own right). In the end we decided that it would be a stretch valuing the land at £35k, and the whole thing was very risky anyway given how keen HMRC are to clamp down on this loophole.
A few years ago I bought the house next door to mine for £285k. We looked at whether we could buy part of the garden separately (on the grounds that it was between my house and my neighbour's house so made sense as a transaction in its own right). In the end we decided that it would be a stretch valuing the land at £35k, and the whole thing was very risky anyway given how keen HMRC are to clamp down on this loophole.
10 September 2009, 11:28 AM
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what about if say you are buying a house at 200k-if you have already offered that and had it accepted can you then instruct your solicitor to say can it be offered as 175k for house and 25k for fixtures and fittings so avoiding stamp duty all together?
or can offer not be amended as such?
or would 25k be to much for fixtures and fittings or can offer not even be amended?
or can offer not be amended as such?
or would 25k be to much for fixtures and fittings or can offer not even be amended?
10 September 2009, 12:21 PM
#10
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what about if say you are buying a house at 200k-if you have already offered that and had it accepted can you then instruct your solicitor to say can it be offered as 175k for house and 25k for fixtures and fittings so avoiding stamp duty all together?
or can offer not be amended as such?
or would 25k be to much for fixtures and fittings or can offer not even be amended?
or can offer not be amended as such?
or would 25k be to much for fixtures and fittings or can offer not even be amended?
as OPM says its possible if the property has seperate title's re garden etc
but really need professional and usually expensive advice
10 September 2009, 05:12 PM
#11
One of my neighbours bought their house for £500k plus £50k cash.. to avoid the 4% threshold
You just need a nice solictor that will agree for a fee. They even signed a separate contractual agreement on the £50k in case it became an issue but this was a side contract and not part of the property purchase!
There are plenty of dodgy solictors and estate agents that will do this
Some solicitors I know will do virtually anything for a bit of money....
Dont kid yourselves that this doesnt happen - it happens all the time!
I was looking at a house recently and was asked if I could pay 80% of the cost of the property and 20% to someelse so that the owner could avoid CGT - obviously you have to know your estate agent fairly well to be discussing such things! - in the end I wasnt interested and would have needed to consider the CGT implications anyway on my end!
You just need a nice solictor that will agree for a fee. They even signed a separate contractual agreement on the £50k in case it became an issue but this was a side contract and not part of the property purchase!
There are plenty of dodgy solictors and estate agents that will do this
Some solicitors I know will do virtually anything for a bit of money....
Dont kid yourselves that this doesnt happen - it happens all the time!
I was looking at a house recently and was asked if I could pay 80% of the cost of the property and 20% to someelse so that the owner could avoid CGT - obviously you have to know your estate agent fairly well to be discussing such things! - in the end I wasnt interested and would have needed to consider the CGT implications anyway on my end!
11 September 2009, 01:26 PM
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Real nasty tax though isn't it 
If you house is worth between £250k - £280k you'll have a real struggle to sell it at that price point as every bugger will want to bring under the 3% threshold.
Why can't it be applied like income tax, i.e. 1% on the first 250k and 3% on the bit above that value. It would be a much fairer system that way
Otherwise spend £249999, stamp duty bill = £2500, spend £250000, stamp duty bill = £7500. It's just stupid that there is such a big jump for going £1 over.
If the government were serious about kick starting the property market (and helping the economy) they should reform stamp duty. But it makes the treasury piles of cash each year so they'll never change it
If you house is worth between £250k - £280k you'll have a real struggle to sell it at that price point as every bugger will want to bring under the 3% threshold.
Why can't it be applied like income tax, i.e. 1% on the first 250k and 3% on the bit above that value. It would be a much fairer system that way
Otherwise spend £249999, stamp duty bill = £2500, spend £250000, stamp duty bill = £7500. It's just stupid that there is such a big jump for going £1 over.
If the government were serious about kick starting the property market (and helping the economy) they should reform stamp duty. But it makes the treasury piles of cash each year so they'll never change it
11 September 2009, 01:52 PM
#14
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One of my neighbours bought their house for £500k plus £50k cash.. to avoid the 4% threshold
You just need a nice solictor that will agree for a fee. They even signed a separate contractual agreement on the £50k in case it became an issue but this was a side contract and not part of the property purchase!
There are plenty of dodgy solictors and estate agents that will do this
Some solicitors I know will do virtually anything for a bit of money....
Dont kid yourselves that this doesnt happen - it happens all the time!
I was looking at a house recently and was asked if I could pay 80% of the cost of the property and 20% to someelse so that the owner could avoid CGT - obviously you have to know your estate agent fairly well to be discussing such things! - in the end I wasnt interested and would have needed to consider the CGT implications anyway on my end!
You just need a nice solictor that will agree for a fee. They even signed a separate contractual agreement on the £50k in case it became an issue but this was a side contract and not part of the property purchase!
There are plenty of dodgy solictors and estate agents that will do this
Some solicitors I know will do virtually anything for a bit of money....
Dont kid yourselves that this doesnt happen - it happens all the time!
I was looking at a house recently and was asked if I could pay 80% of the cost of the property and 20% to someelse so that the owner could avoid CGT - obviously you have to know your estate agent fairly well to be discussing such things! - in the end I wasnt interested and would have needed to consider the CGT implications anyway on my end!
if they could prove the 50K (however the contract was constructed) was part of the property sale you would be liable for the tax.
but you are right it goes on all the time -- and the crime is getting caught (the MP's taught us this)
Last edited by hodgy0_2; 11 September 2009 at 01:54 PM.
12 September 2009, 09:44 AM
#16
For the extra £50k the solicitor charged about £400 for the agreement I'm told (so a nice bit of money for the solictor) thats versus £7k extra on £550k versus £500k so a net saving of £6600
To be honest it is annoying as it lowers the perceived value of houses in the area!
To be honest it is annoying as it lowers the perceived value of houses in the area!
12 September 2009, 01:14 PM
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I believe that the general rule is that you can do the fixtures and fittings trick only if you can justify the price as being market value for items that could have reasonably been removed from the property. Therefore, carpets, curtains, any furniture/white goods, potentially the garden shed etc can be construed as fixtures and fittings. The value of these can be charged separately as fixtures and fittings - and bear in mind that's the second hand value, i.e. you won't get away with claiming more than say 50% of the new value.
I do remember many years ago in my first house purchase - where I genuinely couldn't afford to pay stamp duty on top of the house purchase at the time, I'd only been working ~1 year and interest rates were ~8%. At the time, I took advice from my solicitor about what could be offered with fixtures and fittings. I ended up going to £1500 as that was the most that could be justified for the items listed. I believe they ran with a rule of thumb that over 2.5% of the total transaction value would need supporting paperwork to justify.
Of course, rules may have changed since then.
I do remember many years ago in my first house purchase - where I genuinely couldn't afford to pay stamp duty on top of the house purchase at the time, I'd only been working ~1 year and interest rates were ~8%. At the time, I took advice from my solicitor about what could be offered with fixtures and fittings. I ended up going to £1500 as that was the most that could be justified for the items listed. I believe they ran with a rule of thumb that over 2.5% of the total transaction value would need supporting paperwork to justify.
Of course, rules may have changed since then.
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