December 1, 2003
New rules on stamp duty coming into force today will stop buyers from avoiding to pay the correct levels of stamp duty when buying a property, the Government hopes.
Previously, a well-known avoidance tactic when buying a house would be to pay less up front but make up the value of what the house is actually worth by paying over the odds for fixtures and fittings.
This meant that sellers could set the official price of the house at a level on which the duty would be less. Stamp duty on a house worth less than £250,000 is 1%, but the percentage on properties valued between £250,000 and £500,000 is 3%.
Aside from being a dishonest practice, this tactic had the effect of lowering house prices artificially and providing an unrealistic view of the market.
From today, the rules change in that it will be harder to evade paying the correct amount, because the buyer is now required to fill in a Land Transaction Form, which has to be filed at the Inland Revenue 30 days after a sale is agreed.
The form will contain a more detailed view of what the buyer is receiving for their cash to avoid buyers misleading the tax man.
Failure to file the form incurs a penalty of £100, rising to £200 if the fine is still not paid after 4 months.
Nicholas Brown, a partner at Knight Frank told Countrylife.co.uk: ‘For us, the new system is going to be fairly helpful. The less dodgy dealing there is, the more easily we can get on with our jobs.
‘People are going to have to get out there and bite the bullet, but I don’t believe this will do any harm, and of course it is only going to affect people buying properties around the threshold prices.’
‘When stamp duty was introduced it had the effect of levelling off the market, which has been performing incredibly well ever since, so overall I welcome this new transparency in the business.’
Links:
Inland Revenue
Knight Frank
