Is stamp duty payable on non-discounted price of new build?

Rossco

Hi,

Not sure about this one myself but as far as I'm concerned if I offer £225,000 on a £245,000 new build house my stamp duty is 1% of the £225K not the £245K. I have been told by my conveyancer this is not the case and I have to pay the stamp on the builders asking price rather than my offer. I queried this and was informed that only paying stamp on what I offered would be tax evasion. I fail to see why the discount I was offered by the builder is any different to having an offer accepted under the asking price of any house.

Am I missing a trick here, I know it's only £200 but its £200 Gordo doesn't deserve in my opinion? It could have had serious implications if it took me into the 3% bracket!

The house has been valued at £225,000 for the purposes of the mortgage so paying stamp on more than its worth is odd.

Thanks.

david29dpo

if i were you i would change your conveyancer!! you pay stamp duty on the purchase price, end of story. if your conveyancer does know this then get rid quickly before he or she tells you even more crap!! tax evasion !! what a load of bulls**t !!!

apples1

Absolutely you pay stamp duty on the purchase price.

You conveyancer may have been meaning (although this does not let them off giving you wrong info) about the fact that in the past people have paid a lower purchase price for the house (and therefore stamp duty on the lower amount) then made up the rest by way of payment for fixtures and fittings by coming to an agreement with the seller (and not paying stamp duty on that amount). This has now been clamped down on as it would of course have been tax evasion. Now any payment for fixtures and fittings must be a reasonable amount and not an inflated figure just to avoid stamp duty.

jordan_matthews

I am in the same situation with a new build. My solicitor told me that Stamp Duty is paid on the asking price (in your case £245k) and not on the price you pay (ie minus the discount/incentive).

I dont understand the legal reasons why, but it it unique to new builds.

I trust my solicitor (have used them before) and double checked this with another in the area. Maybe you should do the same, for peace of mind.

bylromarha

Could it be something to do with the fact that you only get the incentives on completion with new builds?

You are being charged £245k for the house and are getting £20k back on completion. As it all happens the same day, you don't notice it as they cancel each other out. However, it does mean the stamp is higher this way.

I've just checked our solicitors bill from when we bought this house new 5 years ago and we paid stamp on the asking price, even though we had monetary incentives. The incentives are all listed there, and the do come off the purchase price effectively, but we paid the stamp on the asking price, not the price after incentives.

I'm not a solicitor, that's my sis, but this explanation would make sense to me.

apples1

The OP didn't say that there was a £20k incentive or cashback. Could Rossco clarify? If that is the case then its not the same as offering a lower price full stop. The price in the contract (ie. the purchase price of the house) will be the amount you pay stamp duty on.

jonclarke

If its not a "cashback" deal, then stamp duty is paid on the contract sale price I would have thought. I'd check this with another solicitor if I were you.

The reason for cashbacks on new builds is so that the builder can report the higher sale price to the land registry, rather than the true "discounted" price.

Go on, someone have a stab at why they would do this ...

knuttykitten

Well, land registry uses price paid info to compile reports as to property prices - I guess your point is that the practice of discounting on new builds gives an inflated idea of 'official' property prices, purchasers think they're getting a good deal as they've managed to negotiate a 'discount' and the builders are still making a packet!

jonclarke

knuttykitten wrote:

Well, land registry uses price paid info to compile reports as to property prices - I guess your point is that the practice of discounting on new builds gives an inflated idea of 'official' property prices, purchasers think they're getting a good deal as they've managed to negotiate a 'discount' and the builders are still making a packet!

Yeah, thats what I'd always assumed, i.e. its to artificially inflate house prices.

Rossco

Hi,

Ok this is starting to make more sense now although I think something has gone wrong at some point.

I made an offer that was considerably less than the discount the sales office were offering at the time (5% discount for 4 week exchange). When my offer was accepted the sales office noted on the reservation form the house was reduced by 20K so we could go ahead and so that we didn't have to pay stamp on the full amount. The builders solicitors must have taken the 20K as a "cashback" discount instead of a reduction in price.

Luckily I still have a copy of the reservation form. Grrrrr.

Thanks for the advice.

sm9ai

Cashback discount. That really sucks. More artificially inflate house prices. Is it worth taking any note of house price statistics?