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Original poster

The Mine Field of Stamp Duty

20 replies

passmyglassplease · 17/02/2011 18:42

A friend of mine is trying to find ways around paying Stamp Duty!

Anyone got any advice or horror stories I can scare her with?

As far as I can see there are no ways around it, the claiming the fixtures and fittings are the same value as the SD is a loop hole that has been closed as far as I can see?

Am I wrong?

OP posts:

Fiddledee · 17/02/2011 18:54

You are wrong there are legal loopholes. However, the inland revenue are contesting alot of the cases through the courts at the moment. Not 100% guaranteed they will work. There are ways to avoid alot of taxes, including stamp duty. Whether you choose to or not is up to you.

Original poster

passmyglassplease · 17/02/2011 18:59

Interesting fiddledee, are they pursuing both the buyer and the seller or just the buyer?

ie are both the parties complicit in tax avoidance?

OP posts:

Fiddledee · 17/02/2011 19:02

there is only one person responsible for the stamp duty and that is the buyer, nothing to do with the seller.

lalalonglegs · 17/02/2011 19:19

What are the legal loopholes, fiddledee? I only know about making the property part of a company but I think HMRC made this more difficult as well. Any others (not planning to use them, I'm just curious)?

In reply to passmyglass, your friend could say that she will "share" the stamp duty with the seller if he is willing. Eg, instead of saying she will only offer #250k on a #275k house, she will offer #265 and he can reduce the offer by #2.5k (or thereabouts) which is half the additional stamp duty she would have to pay so she ends up with a price of #262,500. Buyers who find that no one is prepared to make the jump into the next stamp duty band are sometimes willing to do this. (Hope I've got the sums right, brain feels a bit weak after long day.)

ChasingSquirrels · 17/02/2011 19:23

you can allocate part of the purchase price to fixtures and fittings - but as Fiddledee said HMRC are taking cases on this at the moment. If you do do it, you want to be pretty watertight on the actual value of the fixtures being reasonable market value for fixtures that are actually being sold.

Fiddledee · 17/02/2011 19:31

There is a major loophole not worth taking the risk unless you are paying 4%/5% (soon) stamp duty plus you must be sure that the HMRC won't find anything if they start investigating you further - thats why a friend of mine isn't using it.

lalalonglegs · 17/02/2011 19:38

OK, but what is it?

savewaterdrinkwine · 17/02/2011 21:45

There is no way of getting round it - you have to pay Stamp Duty Land Tax on the whole purchase price which includes payment for fixtures and fittings. Your Solicitor has to certify that this is the correct amount.

No decent Solicitor would advocate you evading paying Tax.

Fiddledee · 17/02/2011 22:27

There is a big difference between tax avoidance and tax evasion.

artyjools · 18/02/2011 08:37

We are looking to buy at the moment and would be paying 4% stamp duty. Several estate agents have suggested that we enter a scheme which would mean that we set up a company in our sole name, the house is transferred at full value to the company and then immediately transferred at a nominal value to us. As only the second transaction attracts stamp duty, none is payable. You pay 50% of what you would have paid in stamp duty to the agents arranging this. That would save us about £16,000.

HOWEVER.....HMIR are definitely tightening up on this and there was a note from the Law Society to solicitors only a few days ago warning solicitors that the HMIR will be challenging such schemes.

We have always been straight up and honest as far as taxes are concerned but I wouldn't want to be on the rough end of their wrath for the rest of my working life.

I do think stamp duty is akin to highway robbery though. House prices in the south east are so high, people don't need to be rich to be forced to pay ridiculous sums of money for the right to move home.

savewaterdrinkwine · 18/02/2011 21:09

Fiddledee - you're absolutely right, there's a difference between tax avoidance and evasion.

Tax avoidance can be legal ie. Wills, Trust creation, tax planning, deeds of variation etc.

However, not declaring the full purchase price including fixtures and fittings to reduce Stamp Duty payment is definitely tax evasion.

fridayschild · 18/02/2011 22:03

Artyjools have those estate agents thought about how you would get that scheme past a mortgage lender? Can't see that happening myself...

thinkingaboutschools · 19/02/2011 19:42

I would not even go there (and given what I do on a day to day basis, I understand the technicalities of what some of these boutique firms are pushing). The firm will charge you about half what the SDLT would be anyway and you can guarantee if HMRC investigates (which I think is pretty likely then any saving will be eaten into with defence costs. Not a good idea.

artyjools · 19/02/2011 20:31

Fridayschild, I donlt think it has anything to do with the mortgage lenders. Why would they be interested?

Thinkingaboutschools - I agree completely. Wonder if we do something similar on a day to day basis ?

Fiddledee · 20/02/2011 15:48

Some lenders do not allow it artyjools.

agnethafaltskog · 20/02/2011 23:29

Supposing a friend offered to sell you her house for £275k. It was a private sale, i.e. not through an estate agent, could you therefore agree to pay her £249,999 for the house and bung her the other £25k thus avoiding the 3% stamp duty?

How would HMRC find out (or am I being very naive?

freshmint · 20/02/2011 23:31

Pay the tax, for god's sake
Haven't you heard there is a recession on? Pay the bloody tax. It funds the NHS, the schools, everything

Silly woman

Fiddledee · 21/02/2011 08:16

agne the only risk is that you can't have any legal documentation abour the £25k so the friend could end up not paying it after the transaction, depends on how good a friend.

freshmint - it is up to everybody's conscience whether to pay stamp duty or not. The richest with a £100k stamp duty tax bill will find loopholes around it.

freshmint · 21/02/2011 14:17

no fiddle it isn't up to everybody's conscience whether to pay stamp duty or not

don't be ridiculous

it isn't like making a charity donation

it is a legal obligation

Fiddledee · 21/02/2011 15:00

don't be so naive - what do you think the army of tax accountants and lawyers do if its not tax avoidance.

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