Can I reduce stamp duty by paying the seller for something else?

27 May 2013

Almost always, no. Stamp Duty (or more accurately Stamp Duty Land Tax 'SDLT') has been around for many years and the Inland Revenue has closed down attempt after attempt at ways to get around paying stamp duty.

One simple test is: if you were not buying the house would you be paying the seller for this 'something else'.

Some people think they can pay the seller's estate agent’s bill, or other expense, but of course this payment fails the test. Indeed, it is logic that it should.

It matters not how you pay the seller for the house, whether you send them one big cheque for it, or you write ten cheques for the same total, but just make them out to pay his food shopping, his travel agent, his golf club, his car servicing, or his children's school fees etc. It is still money you are paying to the seller so they give you their house.

However, there are exceptions, and that almost always revolves around house contents. Certain house contents do not attract stamp duty/SDLT as only land and property are deemed to attract the duty. ‘Fixtures’ are by definition part of the land/property where you would not normally expect to remove them as part of a typical house sale/purchase transactions.

‘Fittings’ on the other hand you would. However, the definitions are not always easy to conclude, and so reference should always be made to the Inland Revenue.

However, this means that it is possible to apportion the price you wish to pay the seller, between the land and the fittings.

However, the trap is to fail to use an accurate second hand value (an 'eBay value' as many conveyancers refer to it as). It is not new pricing, but second hand 'market value'.

If there is overvaluation, then the Inland Revenue can conclude there has been a fraud and all parties involved can face fines and criminal sanctions (by 'parties' this will include buyer, seller, both lawyers and the estate agents).

The temptation to overvalue is greatest when the price the seller wants is close to a stamp duty threshold (£250,000, £500,000 or £1m). Conveyancers are used to clients wanting to pay £250,000/£500,000 for the property and say £15,000 – £25,000 for fittings. Unfortunately, it is almost always an overvaluation.

As a result, conveyancing solicitors always insist on a written and independent valuation when apportioning out fittings.