Developer paying stamp duty

SilverSix

A quick question.

I rang the developer to try and negotiate a further reduction after receiving a valuation to be 're-educated' on how much my house is actually costing me.

Initially it was priced at £275,000 of which I was given a £15,000 reduction, leaving me £260,000 to pay. Other incentives were stamp duty, £7800, paid and £1,000 towards legal fees. I believed the SD & legals were costs I didn't have to front for and had £260,000 to pay.

They have written stamp duty of £7,800 (3% of £260k) to be covered. This leads me to believe stamp duty is added on after my purchase price of £260,000. So £260k is what I believed I was to be paying.

However I have been told stamp duty is deducted from the purchase price leaving my actual 'bill' as it were to be £251,200 (£260k - £7800) and the solicitors bill them stamp duty and the first £1,000 of fees. This sounds a bit odd to me as stamp duty on £251,200 is £7536 by my working. Unless they were 'working backwards'.

Has anyone had a developer pay stamp duty for them? if so did it work similar to this?

Thanks

Ben

WelshNic

Who told you it was deducted?

SilverSix

They have from what they have suggested/told me.

Its a charge I don't have to pay that's for sure. They're saying it's accounted for in my purchase price which would mean my actual bill is £7,800 less where I was under the impression it was a further £7,800 I didn't have to front for on top of everything.

Tiggergirl

It sounds to me that rather than 'you give us 260k, then we give you 7800' they are simply offsetting it which seems sensible to me. You are still responsible for paying the stamp duty and filing the paperwork (via your solicitor) anyway so they have to transfer it to you somehow.

SilverSix

Tiggergirl wrote: »

It sounds to me that rather than 'you give us 260k, then we give you 7800' they are simply offsetting it which seems sensible to me. You are still responsible for paying the stamp duty and filing the paperwork (via your solicitor) anyway so they have to transfer it to you somehow.

This is what I though initially that they would then 'credit' me £7800 somehow. From what they said is that the solicitor will bill them £7,800 and me the remaining £251,200.

I just want to be certain that I'm not going to get screwed while I'm in the position to negotiate as I've only paid my reservation fee so far. Solicitor is on hold while I sorted out the valuation/renegotiation.

She did initially state 'cost price' would be £251,200 but that purchase price was £260,000. I have a feeling it's her working backwards (3% on purchase price instead of 3% on cost price) that has over budgeted for stamp duty.

Tiggergirl

I hunted out my paperwork from when I bought my house from a developer with stamp duty paid. The house price was the gross price that was agreed, and the stamp duty was shown as a deduction separately on my completion statement from my solicitor. The stamp duty was calculated on the gross price.

At the end of the day the amount I transferred to my solicitor was equal to my deposit and the solicitors fees and disbursements. The developer got paid the net amount of purchase price less stamp duty, and the solicitor paid the stamp duty to HMRC.

JQ.

Would it cause any complications with regard the size of your deposit and mortgage if the valuation comes back at £250,200? That's essentially what you're paying for the house and it's quite likely the valuation may come back at that level.

SilverSix

Tiggergirl wrote: »

I hunted out my paperwork from when I bought my house from a developer with stamp duty paid. The house price was the gross price that was agreed, and the stamp duty was shown as a deduction separately on my completion statement from my solicitor. The stamp duty was calculated on the gross price.

At the end of the day the amount I transferred to my solicitor was equal to my deposit and the solicitors fees and disbursements. The developer got paid the net amount of purchase price less stamp duty, and the solicitor paid the stamp duty to HMRC.

Thanks for digging that out I appreciate that

To clarify, in my case I would transfer (*** my math is crap not £251,200, £252,200**** )£252,200 to my solicitor plus any fees? and stamp duty is then sourced from the developer. As I'm really rather confused as to the amount it's going to cost.

JQ. wrote: »

Would it cause any complications with regard the size of your deposit and mortgage if the valuation comes back at £250,200? That's essentially what you're paying for the house and it's quite likely the valuation may come back at that level.

The amount on the valuation isn't a great concern as I was using this to negotiate a further reduction of £5000 to then be told I'm actually paying £7800 less than I thought I was. I thought my stamp duty charge was effectively covered by the dev. not removed from my purchase price?

It seems odd for them not to just drop the property a further £2,200 and save them selves £7800.

CloudCuckooLand

Just offer £250k..? Don't want HMRC to misunderstand what took place and come for £7k, do you...

SilverSix

CloudCuckooLand wrote: »

Just offer £250k..? Don't want HMRC to misunderstand what took place and come for £7k, do you...

Stamp duty IS being paid. I'm not evading tax, far from it. I'm just confused as to who's pocket it's coming out of and how much I'm actually paying!

After having re-read Tiggergirls post I think I understand. I'll report back tomorrow and clear this up for anyone elses future reference.

tyllwyd

I'm a bit confused by this as well. I was thinking about offers where if you are buying a car, say, and they offer to pay the VAT, what they actually do is take the original price (which includes VAT), then deduct 20% to get the price you pay - but when you get the paperwork through, they actually charge slightly less, and add on 20% of that lower price so that the total that you actually have to hand over comes back to the original price less 20%.

That seems much more like the figures you are quoting - but stamp duty isn't usually included when you agree a price for a house, so it doesn't make sense in this context!

adding back in your £1000 towards solicitor's fees
252200 x 3% = 7560
252200 + 7560 = 259560

So you need to work out if they think you have offered to pay £260K including or excluding stamp duty!