Taxman targets
homebuying cheats
Thinking of buying of house and avoiding an upper band of stamp duty? Think
again
Homebuyers who try to avoid paying the full amount of stamp duty face a new
regime from December 1.
Stamp duty land tax has now replaced stamp duty and it requires homebuyers
to complete a self assessment form called the Land Transaction Return.
The tax thresholds remain the same but the move is a response to homebuyers
paying over the odds for fixtures and fittings in return for the sale price
being kept below a stamp duty threshold.
The taxman now has the power to insist that buyers who it suspects of evading
the tax must pay the full amount. Buyers and sellers could also face a fine
and interest charges.
The good old days
Here's how homebuyers used to get round the stamp duty thresholds:
Scenario one: buy a house for £520,000 and you would pay stamp duty
of 4%, which is equivalent to £20,800.
Scenario two: buy the same house for £499,999 and then pay the owners
an extra £20,001 in cash for the fixtures and fittings (such as curtains,
fitted furniture, stand-alone kitchen etc). The owners receive the same total
amount as in scenario one but you as the buyer pay 3% stamp duty on
£499,999 which is equal to £15,000 - that's a saving of £5,800.
Now the taxman has nine months to scrutinise the amount you pay for fixtures
and fittings so your best bet is to pay a fair amount for these. In most
cases your solicitor should take on the extra work of ensuring the correct
forms get to the Inland Revenue but failure to file will incur an automatic
£100 penalty.
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