Is stamp duty payable on the market value or discounted price

tbar11

I have reserved a new build flat at a discounted price through my local council's first time buyer's scheme which is known as "Discount Market Sale". I would like to know if i will have to pay stamp duty on the discounted price which i have agreed to buy or the market value? It will make a great difference as the market value is over £500,000 and i won't be able to claim first time buyers relief and the discounted price is well below that amount and i won't have to pay any stamp duty!


The quote i got from the Solicitor is based on the purchase price but i was advised the Revenue could potentially argue that the price of the flat is higher than the price i have agreed to pay and request the full amount. My feeling is that is unlikely and they just want to cover their back but any advice would be appreciated.



Thanks

foxy-stoat

You pay the stamp duty on the purchase price - are the local council part funding the property or is it just a deal that the developer will advertise the properties slightly higher than normal and give a "discount" to the punters to satisfy a planning condition?

tbar11

Thanks for the reply.
It was part of the planning permission that some flats would be sold at a discount to local first time buyers.The developer hasn't advertised the flat higher than normal. For the remaining of the share, i will enter into a "deed of conveyance" with my local council with no rent to pay, i think this means the remaining share will be owed by the council.

AdrianC

Is this just a one-off discount, or will the reduction have to be applied to onward sale in the future, too?

letitbe90

It'll be based on what you buy it for and not the market value or original price.

tbar11

The same discount will apply to a future sale. I am buying 30% of the market value and when it comes to selling i will sell 30% of whatever the market value will be at that point

getmore4less

With any form of shared ownership

research how you exit the deal

100% open market selling is hard enough without a housing association or council poking their noses in and charging you for their interference.

Mitchell_

I purchased a DMS property. As you legally own 100% but buy at a reduced price, you pay stamp duty on the 100% price, not your portion. This is different to those other schemes where you pay rent on the share you don't own.

However if the people above giving contradictory advice to mine turn out to be correct- let me know as I am owed a big refund!

Edit: I purchased in 2017, so laws may have changed.

kingstreet

Discounted Open Market Value is more like shared equity (HTB) than shared ownership with the local authority having a second charge over the property rather than a percentage share.

In these circumstances, SDLT might apply at the purchase price/market value as it does for HTB. It needs to be checked with a solicitor who deals regularly with S016 stuff as it's not something I do regularly, at least not at a high enough price to bring SDLT into play.

tbar11

It seems this is a gray area and no one knows exactly what the law is, including HMRC! The Solicitor even said they have written to HMRC about this a few times but didn't get a definite answer. In the meantime, the Developer now pressurises me to commit and instruct a Solicitor but i really can't do that without knowing how much stamp duty i will have to pay! If stamp duty is based on the full market value i would have to pay £18,000 which would make it unaffordable....

AdrianC

tbar11 wrote: »

If stamp duty is based on the full market value i would have to pay £18,000 which would make it unaffordable....

So £560k full value. As a FTB...

When you said...

tbar11 wrote: »

The same discount will apply to a future sale. I am buying 30% of the market value and when it comes to selling i will sell 30% of whatever the market value will be at that point

...can I just clarify that you really meant you're paying 70% and getting a 30% discount, so £392k, or do you mean vice-versa, so £168k?