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Minimising Stamp Duty

Wednesday, 6th January 2010

Categories: Market Analysis Sales Selling Tips

Author: Peter Barry

With the temporary increase of the threshold over which buyers pay Stamp Duty from £125,000 to £175,000 ending on 31st December 2009 I thought this would be a good opportunity to take a look at some of the issues surround the tax.

Let’s start by confirming the current thresholds:

Purchase Price Rate
Up to £125,000 Zero
Over £125,000 to £250,000 1%
Over £250,000 to £500,000 3%
Over £500,000 4%

 

 

 


 


The problem over the years has been where a property has been valued around the level of the thresholds – particularly those at £250,000 or £500,000. The additional stamp duty payable if the purchase price creeps over the threshold is £5,000. This has caused some distortion in the market with very few properties selling for just over the threshold levels. 

Some innovative buyers have offered to pay the additional stamp duty on behalf of the buyer but this is really just playing with numbers as they will obviously demand a higher price in return.

A more common occurrence is where a proportion of the sale price is put down as ‘fixtures and fittings’. We keep hearing that the government is tightening up on this so obviously it should only be considered if there are a number of items which will genuinely change hands as part of the sale.

Where we have been involved in transactions of this kind in the past we have asked the seller to prepare a schedule of the items which are to change hands with each one individually priced. Photographs of the items would be a useful addition. The schedule is then passed to each of the solicitors and attached to the file so that future queries by the revenue can be easily dealt with.

The buyer paying the seller’s estate agents’ fees is another way of reducing the effective sale price although in our experience the majority of solicitors would consider this to be evasion (which is illegal) rather than avoidance (which isn’t).

Finally, there are more elaborate avoidance schemes for more expensive properties involving off-shore accounts and shares which claim to get you the tax back after a year (minus a hefty fee) although they come with a considerable risk that the loop hole which is being exploited will be closed during that period.