Stamp duty dilemma

ramit

We have just put an offer on the house we want which is currently on the market at 259K.

The offer we put in was for 250K - The stamp duty limit. This offer has been rejected, but we are still keen to try and get the house, and want to go back with a higher offer, without being hit by stamp duty.

One option is to pay a certain amount for the carpets and curtains, and uping the offer based on this. What amount do you think we can get away with here? 5K? Or is that something the HMRC are likely to pick up on?

If there are any ways of getting round this SD problem, I'd be interested to know!

Thanks

Ram

Doozergirl

I'd wait. No one in their right mind will offer £259,000 as it would cost an extra £7,700 in Stamp Duty. It's a pretty silly asking price actually, most people choose £265,000 as it seems to be the first price point that the SDLT threshold might make sense. Still, though I wouldn't buy at that price either!

If you do offer for fixtures and fittings, you have to make an itemised list and the price paid for each item must reflect the fact that it is second hand.

A very small amount and I suspect the EA will be telling them that they are on to a good thing. I wouldn't offer more than £1000.

diddlydum

HMRC do routinely examine property transactions around the threshold, paticularly where a large sum has been paid for fixtures and fittings, and you would have to have significant evidence that the amount you paid was the market rate. Loading the purchase price onto fixtures and fittings to avoid paying SDLT is a criminal offence, its highly likely that your convenyancer will refuse to sign off the deal.

The only way around it is to either pay the SDLT or get the asking price down. At that price I doubt many people will bid more than £250k.

david29dpo

Offer £250k and there agents fees, no more.

ramit

If we take on their agent fees, are those simply not added to the cost of the purchase - making us liable for stamp duty?

ginger_nuts

ramit wrote: »

If we take on their agent fees, are those simply not added to the cost of the purchase - making us liable for stamp duty?

The agent fees will not be included in the sale price .So if you offer £250,000 & fees .Then the deeds will say you bought at £250,000.The fees will be a private issue

cattie

On a house I recently put an offer in, the ea advised me that £2k - £2.5k would be a reasonable offer for f&f when trying to avoid the stamp duty threshold.

In my own case the ea didn't have to use this carrot as he advised the vendors that £250k was a very decent offer in light of the stamp duty issue, so they accepted & the ea didn't have to use the f&f route to tempt them.

pinkshoes

An offer of £250k is saving you £14k from the asking price due to the extra stamp duty, so maybe find out what their EA and solicitor fees are, and maybe offer to pay all of these. (obviously depending on what fee they agreed with their EA...)

ramit

So would we sort out the payment of the estate agent fees directly through our soliciter? Or is this something we would need to take up privately with the vendor?

Thanks for all your help so far. I'm keen to ensure we are careful not to have any issues with HMRC on this in the future

MarkyMarkD

Another poster here, who sounds like they are making sense:

http://forums.moneysavingexpert.com/showthread.html?t=257374

states that paying the seller's fees is NOT an acceptable method of stamp duty avoidance.

If you pay £250k for the property and also agree to pay the vendor's £2,500 fees, you are actually paying £252,500 for the property and stamp duty would be due on that amount.

Saying

ginger_nuts wrote:

The fees will be a private issue

is no different to any other form of stamp duty evasion which involves paying money "under the counter", all of which are also illegal.

Nenen

I do know someone who played the 'paying EA's fees trick' but he is the sort of businessman who is always taking risks and when, like you, I asked if this was legal I was advised by several good people on here that it isn't and if you get caught there could be serious consequences. If you aren't sure you could always ring up the tax office and ask!

I *think* but am no expert, that the only legal way of you reducing the stamp duty you pay over 250K is if you get the vendor to agree to pay! I know that sounds a bit weird but I've seen EA's advertising that vendor will pay 2% of Stamp duty on houses around 265K (you have to pay 1% which is what you'd pay on just under 250K anyway). I don't think EAs would advertise that offer if it wasn't legal but do check.

If you offered the vendor 259K with him paying 2% stamp duty then in effect he has got almost 254K for his property and you've saved over 5K in stamp duty.

Having said that, I agree with Doozergirl... it would be really strange for them to get offered between 250-259 unless they do agree to pay SD and I would hope the EA will persuade them of that!
Good luck