Before you go, sign up to our free tax saving email course. Get 7 top property tax saving strategies in your email inbox that will help you save thousands in tax. Unsubscribe any time.
|
UK Property Tax Portal
Tax Articles
It was only a matter of time before the Inland Revenue closed a stamp duty loophole that so many people have been using.
The loophole was that homebuyers and property investors would pay over the odds for fixtures and fittings in a house. This was done to bring the cost of the actual house purchase down so that stamp duty could be dramatically reduced. Here is a case study to demonstrate what people have been doing: Case Study John sees a property advertised for £270,000. He loves the house and wants to buy it. The vendor accepts his offer of £265,000. However, this price means that he will have to pay £7,950 in stamp duty tax. OUCH!
He is also interested in buying some fixtures and fittings which are valued at £2,000. This means that he owes the vendor a total of £267,000. However, he agrees with the vendor that he will pay £18,000 for the fixtures and fittings. Therefore he will now only pay £249,000 for the house. By doing this, John has brought himself into a lower stamp duty tax band and is now only liable to pay £2,490 in stamp duty tax. This means that he has saved £5460 in stamp duty tax! About Arthur Weller
To learn more about this service click here. In the case study you can see how easily John was able to make a huge tax saving. However, things have changed from 1st December 2003. Homebuyers will now need to complete a self assessment land transaction return form and send it to the Inland Revenue. The form will give full details of the sale of the property. This means that the Inland Revenue will now know exactly how much was paid for the house and fixtures & fittings etc. This in turn means that the Inland Revenue will be scrutinising very, very closely all transactions that occur around the stamp duty thresholds. The current rates of stamp duty are as follows: - 0% on properties upto £60,000 - 1% on properties priced between (60,001 and £250,000) - 3% on properties priced between £250,001 and £500,000) - 4% on properties priced of £501,000 and above Also, the Inland Revenue will be able to investigate the sale for up to nine months after the deal has been done. This means that you may well end up with an unexpected tax bill if they become suspicious of any transactions! Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants (ACCA) says: "Over time thousands of homebuyers whose property was sold for a figure close to a stamp duty threshold may find that the sale comes under the microscope." So, think twice before you consider using the old stamp duty avoidance method! To learn more about this service click here. |
