F&F jinky to avoid Stamp Duty - Legal?

Lips

I thought the practice of splitting a purchase price into house + fixtures/fittings to avoid stamp duty was illegal, but this agent has put it in black and white in their RM advert...

http://www.rightmove.co.uk/viewdetails-20777549.rsp?pa_n=1&tr_t=buy


I presume then that the practice is just frowned upon, rather than actually being perceived as tax evasion? A house I like is on at FP £265k, but vendor would be prepared to take £255k. That extra £5k over £250k could cost me another £5k+ in Stamp Duty. Hypothetically, could I suggest such a jinky to the vendor, without fear of being huckled off in leg-irons?

- Lips

Generali

If the F&Fs are worth £5,500 then it's fine, you're just acting within the tax laws - fixtures and fittings don't attract SDLT. If they're not in the view of the court then it's tax evasion and illegal.

Bear in mind that it's the value now rather than new which counts so a 1740s original James McBulb lightbulb (Edison didn't invent the lightbulb, it was a Scottish device) would be worth £000s rather than the 1d paid for it. Similarly, a sh1tty late 80s washing machine would be worth a tenner rather than £500 paid at the time.

I guess with tax law the thing to think about is what you would say to a judge if the barristers were questioning you about your purchase. Would it sound reasonable?

Lips

Thanks for response.

So, basically either myself or the Vendor (where does the liability lie?) would have to prove that there were £5k worth of F&Fs included in the sale? Seems like a headache to me...?

When I saw the RM ad, I figured that an Agent wouldn't risk putting something in writing that could come back and bite them on the @ss, so perhaps in this case they have a 'costed-out' inventory that they can whip out for the tax man, if needed. Not something my potential vendor could produce, I'm sure...

Never mind. Ever onwards....

- Lips

Generali

The buyer pays SDLT so the liability lies with the buyer. I guess that there could be a further crime of conspiracy to defraud or something like that with the seller if it could be shown that the seller gained too (eg by selling the house for more than would otherwise be acheived).

I'd err on the cautious side but then I'm very conservative when dealing with the taxman. Others like to get away with what they can. The choice is yours.

TBH, the penalties aren't likely to be huge if you were to get caught but paying the extra stamp could hurt.

neverdespairgirl

Lips wrote: »

I presume then that the practice is just frowned upon, rather than actually being perceived as tax evasion? A house I like is on at FP £265k, but vendor would be prepared to take £255k. That extra £5k over £250k could cost me another £5k+ in Stamp Duty. Hypothetically, could I suggest such a jinky to the vendor, without fear of being huckled off in leg-irons?

Depends what the f & f actually are. If you are talking made-to-measure solid oak furniture throughout, plasma TVs in every loo, and an old Master or two, no problem.

If you are claiming to pay £5k for some 10 year old Ikea curtains, expect trouble.

chickmug

Generali wrote: »

The buyer pays SDLT so the liability lies with the buyer. TBH, the penalties aren't likely to be huge if you were to get caught but paying the extra stamp could hurt.

Below is from the relevant legislation. Trying to overvalue F&F is regarded as a way of evading tax and as such has very punitive penalties including threat of prison. Some years ago not so harsh but then there was a major shake up so it really is not worth it.


95 Offence of fraudulent evasion of tax
(1) A person commits an offence if he is knowingly concerned in the fraudulent evasion of tax by him or any other person.
(2) A person guilty of an offence under this section is liable—
(a) on summary conviction to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both;
(b) on conviction on indictment, to imprisonment for a term not exceeding seven years or a fine, or both.

Richard_Webster

The furniture would have to be very new and very impressive to be worth £5K!

I don't know why people do this £249,500 thing...or £249,995...?

You can pay £250,000 for the house and only pay £2,500 SDLT. It is over £250K that the 3% rate kicks in.

chickmug

Do some people perhaps buy at £249,999 and then pay the vendor the £5,000 cash in hand?

chickmug

Richard_Webster wrote: »

The furniture would have to be very new and very impressive to be worth £5K!

I don't know why people do this £249,500 thing...or £249,995...?

You can pay £250,000 for the house and only pay £2,500 SDLT. It is over £250K that the 3% rate kicks in.

But what would be allowable F&F's. Would it be furniture which I am surprised about, or would it be carpets/curtains, or would it be garden shed, or would it be the kitchen sink type of thing. Are there any schedules anywhere for guidence?

chalkswindon

In respect of the advert posted originally, the property is sold subject to a tenancy and therefore the Vender/Landlord might have alot of F+F in the property. Washing machines Fridges, Frezzers all of which can be classed as F+F.

The best way is to have the vendor itemise the list and have it noted in correspondance between Solicitors.

Some people seem to think that by selling at £249,500.00 as oppossed to £250,000.00 exacatly that this means the IR are less likley to investigate the transaction.

However we all know the IR are not that stupid

PasturesNew

It isn't legal for Fixtures & Fittings.
It would be legal for Furniture & Furnishings, IF independent valuation declares that those are worth the amount being paid. As was said above, not for old tat.