Price over stamp duty threshold

jay7_2

We are thinking of making an offer on a house that is on the market for £250k (we're FTB's). The vendor bought the house with a large garden a couple of months ago for £250k and then divided the garden in two plots. He's selling the slightly larger plot with the house for £250 and wants to build a new house on the other part of land.

He applied for a planning permmission but this was marked as invalid (too long story). I talked to the neighbours and I was told they will oppose the planning application because the new house would change the character of the street. I also talked to the council's planning officer and there seem to be 4 important issues there. I was baisically told that the chances of granting the permission are pretty low, if any.

Now, we want to offer the full asking price of £250k for the house with the original garden, i.e. both plots. I know the vendor will reject that so we will have to increase the offer. However, we don't want to go above £250k due to the higher stamp duty band so we were thinking of offering money for either fixtures & fittings, or paying EA's fees. We'd be happy to pay up to £260k for the house but we're not happy about paying extra £5300 tax for the £10k above £250k.

What is considered to be a normal price of fixtures and fittings? The vendor fitted a new kitchen and bathrooms recently (very very cheap though) and there is a fireplace in the sitting room - I don't think there's anything else in the house that could be included in F&F's. Also, is it legaly OK to pay for the vendor's EA fees?

I'm not looking for a legal advice at this stage, just some guidance or ideas. Thanks.

asajoseph

You're not the first person to think about this one! Believe me, your vendor will be having exactly the same conversation with anyone who offers on this property, so you may want to think hard before bending over backwards to throw money at this guy.

However, this is a loophole that authorities have worked hard to close, and are not going to let you pay significantly more for the F&F than they're worth. If the kitchen & bathroom is new, he should still have receipts for this work - ask to see these, and you can offer to pay the amount they show (not more!).

tek-monkey

Only do what you honestly believe is legal, and get legal advice. Just remember HMRC can take a long time to catch up with you, but once bitten they rarely let go.

martindow

I think I would move on here - it does not seem to make sense to pay the same as he did a few months ago to buy less. He is also going to be asking silly money for the plot of land if he thinks it might get PP.

Don't you think this situation could be different to claiming excessive amounts for F&F to avoid SD? If the seller has separated the titles would this not be two separate transactions - one for the house and the second for the plot where he is seeking PP?

new_home_owner_3

Offer him the same amount he paid for it and tell him you want the 2 plots, i know houses have stabalised but this bloke seems to be taking the p!ss.

If he says no walk away, he will soon come back when he dont get planning permission, having said that these property developers can be persistent, round by me the locals opposed a new developmet on a few occasions but after a lonfg fight the developer got his way.

jay7_2

martindow wrote: »

I think I would move on here - it does not seem to make sense to pay the same as he did a few months ago to buy less. He is also going to be asking silly money for the plot of land if he thinks it might get PP.

The house is in the best part of the town. He got a real bargain when he bought it so I wouldn't mind paying a bit more. Similar houses in the area sell for much more.

martindow wrote: »

Don't you think this situation could be different to claiming excessive amounts for F&F to avoid SD?

I don't want to claim excessive amounts. I want to know what is normal and not excessive since I've never been in this situation before.

martindow wrote: »

If the seller has separated the titles would this not be two separate transactions - one for the house and the second for the plot where he is seeking PP?

No, it hasn't been separated yet. It still features as a single plot - I checked that with the council.

jay7_2

tek-monkey wrote: »

Only do what you honestly believe is legal, and get legal advice. Just remember HMRC can take a long time to catch up with you, but once bitten they rarely let go.

I wouldn't do anything illegal, of course. All I want to know is how much do people think is OK to offer as F&F's. I like asajosep's suggestion to pay for the kitchen and bathroom if he still has the receipts. If the solicitor thinks that's not right, I wouldn't do it but I want to have an idea of what I can offer.

Could paying EA fees be seen as tax evasion?

Richard_Webster

I agree with the advice about not paying unrealistic prices for fittings and chattels - and remember some of the bathroom items will be fixtures and therefore part of the property and not available for separate sale.

If the seller is unlikely to get planning permission he can either keep the land and sit and hope the Council change their mind in the future or he is stuck with a bit of land that nobody much can do anything with.

If it has no planning potential - who is going to buy it for anything other than garden land? In a few years time he may end up selling to OP for peanuts because nobody else wants it - so there could be an argument for just buying the house and the garden he was offering and letting him sweat over the other piece of land.

jay7_2

Richard_Webster wrote: »

remember some of the bathroom items will be fixtures and therefore part of the property and not available for separate sale.

Oh, that's something I haven't realised. Thanks for pointing it out.

Richard_Webster wrote: »

...so there could be an argument for just buying the house and the garden he was offering and letting him sweat over the other piece of land.

That's a risk we're not prepared to take. The new (smaller) garden is just too small for the type and size of house. The new house would have to share the driveway with the existing house so the chance of getting the planning permission in the future is very close to zero.

Richard, would you mind commenting on whether paying vendor's EA fees could be seen as tax evasion please?

morg_monster

Hey
I asked a very similar question a few weeks ago! Here are the answers I got (and from my own research).

It IS legal to add a sum for chattels / fittings (NOT fixtures!) which is not included in the stamp duty total. However, this needs to accurately reflect the goods left behind. It can include carpets, but NOT fitted kitchens or bathrooms. It can include white goods bought separately (not as part of fitted kitchens). Basically it can include anything which can be removed without "temporary destruction of the property". The other thing is that everything is obviously second hand, and you really should not price items at more than 50% of their new price, which means if you are going to add 10k for fittings, they need to have cost 20k new. Also the list must be fully itemised.

Secondly. Paying EAs fees for the vendor.
Any "transfer of debt" or assets between parties to the sale is considered as part of the total transaction cost, and so IS liable to stamp duty. Thus, if you pay the EA fees for the vendor and do not include it in the calculation for stamp duty, this IS tax evasion. I was told this by a tax advisor (on these boards, so obvious caveats). He also said that most EAs, solicitors, accountants do not understand the whole Stamp duty shenanigans and so do not necessarily trust anything they tell you.

Our EA was all "it's fine, we put through sales like this all the time, it's 100% legit". Well, it isn't her a*se on the line in 6m time when HMRC come sniffing about, is it. It is YOUR responsibility as a seller to pay the correct stamp duty. The only really legit way around it is to ask the seller to pay the stamp duty, or the difference going from 1% to 3%. And it sounds like in this situation there's no way they'll be interested in that.

jay7_2

Thanks morg_monster, that is really useful, exactly what I wanted to know.