3% Stamp Duty Question

pacba

I wonder if anyone can help with my house buying dilemma?

We are trying to purchase a property for £257000 (asking price £269995). The vendors have agreed to sell for this but our problem is the 3% stamp duty! (it really stings and may end up being a deal breaker).

The estate agent has suggsted that we could purchase for £250000 and then do a 'private deal' for the remaining £7000 (hence only pay 1% stamp duty).

This worries me because my solicitor has said that he would only be prepared to have £3000 for 'fixtures and fittings' otherwise it might look like 'tax evading' - is this true or is my solicitor being ultra conservative? (I've heard that the treasury get jittery if you go more than 10% on fixtures and fittings which doesn't fit in with his figures). Similarly, paying £7000 privately could be seen as the same.

Now we're people who don't want to 'step on the grass' if there is a 'don't step on the grass' sign so I wanted to know what position doing a private deal like this would put us in - my solicitor has always been very conservative which is usually a good thing!

Any thoughts would be gratefully received as the house is a good buy!

silvercar

Your vendor's are going to have this problem with every buyer.

It really depends how dodgy you and the vendors want to be.

safe option: pay £254k for house and £3k for F+F, suffer big stamp duty bill.

dodgy option: Pay £249,999 for house, £3k for F+F, pass £4,001 in used notes in brown envelope to vendor and don't tell your solicitor! To protect yourselves you could do it via the EA. (EAs being dodgier by nature than solicitors!)

Ian_W

I think you'd be very hard pressed to get your [most] solicitors on board with this suggestion. It's tax fraud, which ultimately is a criminal offence and the EA knows this perfectly well, s/he is trying to get you to commit emotionally to the house so they get a sale. As silvercar says, used notes/brown envelopes and dodgy EA's spring to mind.

I also understand that HMR&C are looking much more closely at transactions close to the SDLT thresholds so professionals like solicitors are not going to put their neck on the block for you. Personally I'd offer them what I think the house is worth, conditional that they pick-up 2 of the 3% stamp duty [you'd pay 1% up to £250K] if it's £250,0001 or above.

EDIT to add: Not everyone who walks on the grass gets caught, but HMRC enquires are notoriously intrussive so it could be very unpleasant if you do.

Crispy697

I'm in a similar situation. We're paying £260K for our next house, from an original asking price of £269,950.

Whilst i'm not keen to pay the government 3% stamp duty, i'm resigned to the fact that it's the only choice.

I've discussed with my solicitor, and he's made it clear that transactions around the stamp duty boundaries are closely monitored. Any "private" deals or inflated fixture and fittings costs are tax evasion, and are treated very seriously.

I'd suggest that you speak to your solicitor about the fixture and fittings idea. Solicitors are provided with guidelines to the amount acceptable.....i'm pretty sure the maximum is about £1K for a house of this value.

And the idea of getting the vendor to pay some of the stamp duty also poses an issue. You will need to tell your lender of the deal, as it's classed as a sales incentive.