Avoiding 3% SDLT by buying garage separately

ben1977

Hi all, hoping for some advice. Just put in an offer on a property and after some negotiating a value of £265,000 was accepted.

Obviously I'm keen to get below the 250k 3% threshold. I'm not a first time buyer.

I've looked at the 'fixtures and fittings' route, but don't think I can fill in the SDLT form to show 15k's worth, plus I know that's subject to scrutiny by the tax people.

Can anyone offer advice on the legalisities of getting the owner to break the garage off of the sale, and me buying it separately at say, £15,001, thus making the house sale £249,999. I end up with 1% tax on £265k instead of 3% on £265k.

Is this illegal? Is this tax evasion or tax avoidance?

Thanks!

Ben

tbumps

Hi Ben

We've looked into this as a seller. Is the garage completely separate from the house (e.g. in a row of garages away from the house) so that it could legitimately be sold separately? If so, that could be a sensible way to legally avoid tax, I would think (as a complete layperson).

Victoria

ben1977

tbumps wrote: »

Is the garage completely separate from the house (e.g. in a row of garages away from the house) so that it could legitimately be sold separately?

Victoria

Hi Victoria!

The garage is one of a two garage out building. The building straddles the plot of the house so that the garage is on our plot and its conjoined garage twin is on the neighbours plot. Both garages are on driveway space in front of the houses.

joolley

Oooh, I tried to do this. My solicitor was having none of it as he said this would be viewed as tax avoidance - not the good kind so I think I mean to say evasion. Nowadays with the way in which the registrations are made, they'd have to have 2 separate titles or something to be successful. So he said. I'm in Scotland.

I have an accountant to do my tax affairs and a solicitor to advise me in other matters. I don't pretend to know the ins and outs, but I think I recall correctly the advice given at the time.

joolls

lfc321

ben1977 wrote: »

Hi Victoria!

The garage is one of a two garage out building. The building straddles the plot of the house so that the garage is on our plot and its conjoined garage twin is on the neighbours plot. Both garages are on driveway space in front of the houses.

I'm certain this won't wash if the garage is on the plot of the house. For the sellers to sell it separately firstly they're going to have to divide their current plot into 2 separate registrations at the Land Registry (presumably requiring new deeds and plans be drawn up etc) and then sell you both separately.

Even if that were possible (and even if it didn't cost more than the Stamp Duty you're saving) then it would surely be pretty transparent to the revenue?

loopyanna

I have to agree with the posts above i'm afraid.... it will be blatantly obvious to the land registry what you've done as they would get both transfers at the same time! I think you'll just have to take a deep breath and sign the cheque

Cannon_Fodder

Not going to work;

http://www.hmrc.gov.uk/sdlt/transaction/linked-transfers.htm

SDLT where there are two or more linked purchases or transfers.

"There are some situations when two or more property transactions that involve the same buyer and seller are treated as being 'linked' for Stamp Duty Land Tax (SDLT) purposes. People connected to a buyer or seller can count as being the same buyer or seller.
If two or more transactions are treated as linked then the buyer must pay any SDLT due on the total value of all the linked transactions. This may mean that they have to pay a higher rate of SDLT than if the transactions had been treated individually."


"For example, if a residential property was sold in such a way that Mrs Smith purchased the house but her husband Mr Smith bought the garden, the two transactions would be linked. This is because Mr and Mrs Smith are connected people and they're buying things from the same seller as part of a single deal."

Richard_Webster

In this case nobody would buy the house without the garage would they? So the transactions are obviously linked.

I had a case a few yaers ago where a client bought a terraced house with no off road parking in an area where this was at a premium and with it came an odd one-off garage a few streets away. When he sold he didn't include the garage and sold it separately later (presumably because he could get more for them separately). However, I think if he genuinely offered them as separate and independent deals and was willing to sell the garage separately then they wouldn't be linked.

Builder offers flats at £100K each. Investor buys 2 and pays £200K for the two - they are separate transactions and builder would have happily sold the flats individually to someone else. If there were 10 flats in the block and an investor offered £900K for all 10 flats then builder would probably only sell for that price if the investor bought all 10 so they would be linked.

James_Trimby

Hi Revenue can link many transactions for stamp duty much less obvious than what you are suggesting ! And unlike the past they do check and also put some liability on the solicitors making it very difficult. Buying from same person at same time links them (buying 200 seperate houses from a landlord is linked even though in different towns and all registered seperately as a worse case eg)

At this price there is one DOTAS registered scheme out there that would save you about £3250 of your stamp duty using some very tried and tested loophole planning (you would need to instruct a different solicitor to do the transaction) but otherwise does not effect your offer/mortgage etc... Look out for an accountant registered with PROBIZ or PM me (no one else offers under £500k so hope no one minds mentioning name!)

DarrenTMH

There's at least one other scheme which would in this case realise savings over £3,900, it's not PROBIZ and so they clearly do not have a monopoly on SDLT mitigation in the 3% band as suggested.

sadly though for anyone (e.g the original poster) who may wish to take advantage of this, as I have a vested interest in this scheme the rules of this forum prevent me from providing further details which would otherwise facilitate a straightforward route to any readers enjoying these savings.

Please correct me if I've misunderstood the forum rules on this matter, in which case I'll happily provide further scheme and contact details

ItMightBeUsefulOneDay

There are always off-the-books routes around these things but often it's deemed tax evasion and if there's one government department you don't want breathing down your neck it's HMRC. Years after the event they can come back to bite you on the @rse or just change the rules, backdate the law and then come back to demand the cash (with interest).

With such a large fixed asset, I'd play firmly by the rules. Sorry. I begrudge paying the government every penny of tax but this one is difficult to avoid without really bending the rules (to breaking point).