Is this classed as an illegal method of avoiding stamp duty?

davilown

Is it legitimate to buy a house for a set price (just below the next stamp duty level) and paying the vendors estate agent fees?

Cheers

evansmummy

Our estate agent suggested that idea to us so it does go on. Legally I'm guessing it's not but it's what goes on by the looks of it.

blue_haddock

pretty much yes -as is offering to pay over the odds for fixtures and fittings.

davilown

blue_haddock wrote: »

pretty much yes -as is offering to pay over the odds for fixtures and fittings.

So if I was to pay £1500 for fixtures and fittings would that then be legal?

G_M

You are planning to break the law. And HMRC are not stupid - they look more closely at properties just below SDLT thresholds.

SDLT is not charged on the selling price, it is charged on 'the chargeable consideration'. In this case, paying the EA fees would count as consideration. It is a payment you are making in return for the property - the fact you pay a 3rd party (the EA) is irrelevant.

Similarly, fixtures and ftting must be genuine values. Valuing an old fridge at £500 in order to lower the selling price below a SDLT threshold is fraud. Look on ebay for realistic 2nd hand values of F&Fs !

Gwhiz

davilown wrote: »

So if I was to pay £1500 for fixtures and fittings would that then be legal?

Not if they are worth less than that and have been artificially inflated to avoid SD.

davilown

G_M wrote: »

You are planning to break the law. And HMRC are not stupid - they look more closely at properties just below SDLT thresholds.

SDLT is not charged on the selling price, it is charged on 'the chargeable consideration'. In this case, paying the EA fees would count as consideration. It is a payment you are making in return for the property - the fact you pay a 3rd party (the EA) is irrelevant.

Similarly, fixtures and ftting must be genuine values. Valuing an old fridge at £500 in order to lower the selling price below a SDLT threshold is fraud. Look on ebay for realistic 2nd hand values of F&Fs !

G_M - I'm not planning to break the law, I just wanted to know if it was breaking the law. By general consensus, I fully appreciate it is!

Will be going back to the EA and stating the fact that I will not be willing to do it - if for nothing else, my own integrity. I am not concerned about losing the house, but my losing job, pay, pension and possible detention (got to love the forces!) is not worth £7.5k

InkZ

The amount is so small, that I'd be amazed if they are not just trying it on. No seller in their right mind would reject anything under £1500 over the SDLT limit.

The agent will be pushing them hard to take an offer of the max up to the limit.

Stick to your guns and put your max offer in.

agrinnall

I'm sure InkZ is right, no house will ever sell for a price just over the stamp duty limit, stick to a maximum offer under the limit, if the vendors are foolish enough to hold out for a higher price then move on.

sonastin

The easiest way to look at it is "would I be prepared to pay that to/for the vendor if I wasn't buying the house as well" - if the answer is yes, HMRC probably won't question it. If the answer is no, it sounds like a way to avoid stamp duty.

So, if you would buy his the fixtures and fittings from this vendor for £1500 to put into a different house but it just so happens that they are in the house you're buying then that is OK. If you would only pay £25 for them on e-bay but you're magically willing to pay the vendor £1500 for them, that is suspicious. I can't even come up with a reason why you might pay someone else's EA fees unless it was because they were accepting an artificially low price for their house...

davilown

We like the house, the seller needs to sell and have said I'll pay £900 for fix and fit, providing the vendor can produce an appropriate list for me. have stuck to guns for the previous 5 offers/counter offers