Stamp Duty question: Is my solicitor right?

parkylad

Hello there

I'm currently purchasing a house from my family for £140,000. The background work has been going on for sometime and I was hoping that it would be all sewn up in time for Christmas and before the end of the Stamp Duty holiday. However, my buyer has thron a spanner in the works and it looks like that will not be possible.

I am fortunate however to have already taken possession of my new home and am currently living in it. I found, from another thread on this site, a link to this pdf from the government clearly stating;


The effective date is normally the date of completion, not the date of exchange of contracts. However, the effective date may be earlier than the date of completion if the contract is substantially performed, for example, if the purchaser takes possession or pays the purchase price in advance of completion.


I am taking this to mean we can complete the SDLT return form now (as I have already taken possession) and thus avoid paying Stamp Duty on completion in the New Year.

I mentioned this to my solicitor and their initial reaction was that the effective date is the completion of the sale, period. They seem reluctant to do anything else.

Are they right? Who should I talk to if I think I'm being hard done by?

Any help would be greatly appreciated, I wasn't expecting to be landed with the Stamp Duty charge and I have to go deeper into debt to cover it.

Thanks.

Chris

Fire_Fox

Have you spoken to the inland revenue?

DVardysShadow

Needs the agreement of your family [via solicitor] to accept an IOU from you and permit the change of title. I would think.

parkylad

Thanks for the replies.

@Fire Fox: I have tried ringing the Stamp Tax Helpline but unfortunately they were not very helpful, quoting "We're not legally trained, do you not have a solicitor dealing with this?". They did suggest I write to the Birmingham Stamp Office which I am doing but whether I receive a reply in time is debatable.

@ DVardysShadow: My understanding is I am not asking for a change of title (or ownership), merely just stating that I have taken possession of the property. Although how this would be proven if it was ever queried is another question altogether.

poppysarah

If you do something to try to avoid having to pay it and end up having to pay it, how cross are you going to be?

Cannon_Fodder

http://www.taxationweb.co.uk/stamp-duties/stump-duties/stamp-duty-land-tax-a-beginners-guide.html
Substantial performance

"Under the new regime where there is both contract and subsequent completion by a conveyance, SDLT will be charged only once (as indeed is stamp duty under the current regime), though it may be charged on either contract or completion, whichever provides the ‘effective date’. The date of the contract will be the effective date if the contract is ‘substantially performed’ without having being completed. Substantial performance means possession by the purchaser of the whole or substantially the whole of the subject matter of the contract or payment or provision of a substantial amount of the consideration (section 44(4)). Taking possession would include ‘obtaining the keys to the door’ or, if the building is let, receiving the rents. It does not matter that the contract is conditional, for example the assignee of a lease taking occupation pending the landlord consenting to the assignment. If the condition is not satisfied, the SDLT paid can be reclaimed, as indeed also if the contract is subsequently rescinded or annulled. It might be unusual that the purchaser takes possession of the property without at the same time paying a substantial amount for consideration. But it could happen, for example in a family transaction. "


see also http://www.hmrc.gov.uk/SO/online/substantial.htm



The problem comes, at this late stage, in getting your solicitor to be comfortable with what is probably a fairly rare and obscure application of the rules.

He has a responsibility to do the right thing for you, as well as what is right for HMRC. If he tries to go down the route you suggest, he may open himself up for a liability, if he does it (through lack of previous experience in something obscure) in a way that later does not hold water with HMRC.

parkylad

Thanks again.

@poppysarah: Very cross but I was already resigned to paying the stamp duty until I came across the aforementioned information. At the moment I have a glimmer of hope but it all depends on my solicitor's willingness to act.

@Cannon Fodder: Thank you for the information, it does indeed back up what I suspected from the consise statement in the earlier PDF. I do wonder as to, if the statement is there in black and white from the Inland Revenue themselves, why would it put my solicitor in a precarious position if they were to exercise this clause.

Now I think of it, the Council Tax office has been notified that we are now living in the new house and my old house is empty and I am now paying a different amount of Council Tax. Might this be one avenue of evidencing possession?

Richard_Webster

If there is no mortgage involved then the practical answer is to complete the SDLT form now and see whether there is any come back - the worst that can happen is you have to pay the £1400 but you could well get away with it.

GDB2222

Richard_Webster wrote: »

If there is no mortgage involved then the practical answer is to complete the SDLT form now and see whether there is any come back - the worst that can happen is you have to pay the £1400 but you could well get away with it.

Surely they should do more than complete the SDLT form now. They should convey the property to the OP, whilst leaving the purchase money outstanding as a loan. That can be secured on the new property as well as the old property, if the OP's family don't just trust him to pay over the money when he has it. This way, there's no question that the transaction has completed before 31 Dec.

Thrugelmir

If the property has vacant posssession. Then why won't the transaction be completed in time? You mention a spanner in the works. Maybe this some bearing on your solicitiors reluctance to file the SDLT form.

CJE

You may be able to submit the tax return but unfortunately I think HMRC will catch you with this:-

"Where a contract that has been charged to stamp duty land tax by virtue of being substantially performed is subsequently completed by a conveyance both the contract and the transaction effected on completion are notifiable transactions.

However, the tax is due on the latter transaction only to the extent, if any, that the amount of tax chargeable on it is greater than the amount of tax chargeable on the contract."