Avoiding stamp duty?

youngie

when you have your survey done ask for a fixtures and fittings breakdown and explain to the surveyor why you want one they maybe able to help mine was very helpful then make sure you make it clear you are offering x amount for the property and the rest for fixtures and fittings

jyonda

Given that the SDLT applies to all money changing hands then there is no margin for paying a small amount for fixtures and fittings as it is all treated as one transaction. Is this correct?

JennyB

jyonda - nope! SDLT applies to all money changing hands in exchange for the land - you do not pay SDLT on money changing hands in exchange for chattels - i.e. fixtures and fittings. It has to be a reasonable amount though.

plane_boy2000

mi-key wrote:

Beware - its very easy to take peoples ( forum posters, mates, solicitors etc... ) advice on things like this - BUT - they arent the ones who will end up with a hefty fine or prison sentence for tax evasion.

If your solicitor has agreed to and conducted that transaction then they would also be facing charges with you I would imagine - possibly more so if you acted upon their advice.

PosterBoy77

RiskAdverse100 wrote:

Stamp Duty Land Tax is not paid on the value of the property being purchased but rather on the money changing hands.

If one party wanted to sell a property worth £1m to another for £200k then tax is paid on the money changing hands and the bill is £2k rather than £40k.

There may of course be consequences for other taxes of selling a property at an undervalue in this way.

HMRC have a wide definition of what 'money changing hands' means. This very clearly includes the assumption of a debt owed by the Seller as well as the release of a debt owed to the Buyer.

So if A owes B £1m and he gives him a property worth £1m to cancel the debt out then tax is paid on £1m although no money changes hands.

Exactly the same principle applies if the Buyer assumes a debt of the Seller as part of the deal. Although in your example the debt is a fairly small sum it is still a debt (the Seller being contractually bound to pay it as a result of the sale agreement with the estate agent) and it must be disclosed to HMRC.

As I said previously, if the assumption of a debt was not 'chargeable consideration' then there would be nothing to prevent a buyer agreeing to take over the seller's huge mortgage, pay the difference between the sale price and the mortgage sum in cash and pay tax on a much smaller sum.

If you really feel that this is avoidance rather then evasion then feel free to contact HMRC and seek their guidance.

I am in no way condoning the truly ridiculous way in which SDLT is charged on properties. Not to have a stepped bands is grossly unfair to people trying to buy property at around the band limits and is hardly surprising that people to look to reduce their tax bill in imaginative ways such as this.

RiskAdverse100

You are correct, but for most transactions this is splitting hairs, as the "money changing hands" for the property will almost always be the deemed value of the property. However agreeing to pay estate agent fees and other fees are nothing to do with the value of the property, and money changing hands to pay for these things are not changing the property. These things could be argued for hours, but as long as the value of the other items are reasonable, it should be possible to justify paying for other things outside the scope of SDLT. See this page for info where it talks about reasonable apportionment.

http://www.hmrc.gov.uk/manuals/sdltmanual/sdltm04000.htm

Mrs_pbradley936

Fixtures and fittings are items that the vendor could quite easily take if you did not want them such as curtains and curtain poles, carpets, light fittings, garden ornaments and anything else not part of the stucture. If you are within a few thousand of the changing of the stamp duty bands it makes perfect sense to have one transaction for the house and another for the fixtures and fittings. You could quite easily pay £249K for the house and £3k for the fixtures and fittings. As for how much, well you would have to be reasonable and itemise everything room by room. Such as "Lounge:- carpet £500, wall lights £200, ceiling light £150, etc. etc.

RiskAdverse100

Mikael states that agreeing to pay estate agents fees has nothing to do with the value of the property.

However, if you agree to buy a property for £260k and then subsequently agree that the paperwork should show a figure of £250k for the property with the buyer agreeing to pay the seller's sale commission of £10k then it most definitely does have something to do with the value of the property!!

The web page you link to deals only with property contents for straightforward residential sales. It is of course perfectly legitimate if you have agreed to buy a property for £260k which has contents (which the seller could quite easily take with them on completion) with a genuine value of £10k to pay £250k for the property itself and £10k for the contents and thus pay tax of 1% on £250k.

RiskAdverse100

PosterBoy77

RiskAdverse100 wrote:

Mikael states that agreeing to pay estate agents fees has nothing to do with the value of the property.

However, if you agree to buy a property for £260k and then subsequently agree that the paperwork should show a figure of £250k for the property with the buyer agreeing to pay the seller's sale commission of £10k then it most definitely does have something to do with the value of the property!!

The web page you link to deals only with property contents for straightforward residential sales. It is of course perfectly legitimate if you have agreed to buy a property for £260k which has contents (which the seller could quite easily take with them on completion) with a genuine value of £10k to pay £250k for the property itself and £10k for the contents and thus pay tax of 1% on £250k.

RiskAdverse100

Well you could say that, but the value of the property is what someone is prepared to pay for it. I would say that in many cases people are overpricing their property to be able to "make" some extra money to pay for these fees. There was a recent thread on here where someone was trying to buy a house that had been bought by the current owners only 3 months before, but they wanted 5k more than they had paid. The house is probably not worth that. If someone was generous and decide to pay them 1k more than what they had bought their house for and pay estate agent fees of 3k then I don't think anyone can argue that the house has been artificially underpriced.

Anyway, all I'm saying is that the person who first mentioned it in this thread mentioned something that in many circumstances shoud be quite legal, even the inland revenue do not like it.

lilyann1

I have been told by a friend that if myself and my vendor exchanged properties that this would significantly lower opur SDLt fee.
We have had problems in our chain for the last 6 months with our vendor now not being able to find anywhere.
I am selling a 3 bed house at £275k and he is looking fror a 3 bed house but only up to £250k and we are trying to buy his house at £408k.
If we were to swap and just exchange monies of £133k would this mean I only pay 15 SDLT on the £133k???
I always though you would have to pay money on the full asking price???

Jorgan_2

lilyann1 wrote:

I have been told by a friend that if myself and my vendor exchanged properties that this would significantly lower opur SDLt fee.
We have had problems in our chain for the last 6 months with our vendor now not being able to find anywhere.
I am selling a 3 bed house at £275k and he is looking fror a 3 bed house but only up to £250k and we are trying to buy his house at £408k.
If we were to swap and just exchange monies of £133k would this mean I only pay 15 SDLT on the £133k???
I always though you would have to pay money on the full asking price???

This used to be the case but I believe this loophole has been closed. I had clients trying to do similar, one of them was a solicitor & checked with his conveyencing dept. who told him he would have to pay SDLT on the full purchase price, not the difference. Check with your solicitor.