Sam Dunn: Is this stamp-duty-avoidance plan legal and above board?

House Doctor

Question: I'm chasing a property that's on the market for an already reduced £265,000 but want to avoid the hefty 3 per cent stamp duty. Could I offer £248,000 and so pay stamp duty at 1 per cent instead, and pay £17,000 separately for all the fixtures and fittings (of which there are plenty). Can we legally do this?
GD, Kent

Answer: It may well sport all the markings of a crafty tax dodge, but as long as you tread carefully, what you propose is actually all above board. Most buyers' nervousness about what you can – and can't – get away with today stems from previous lackadaisical rules. These let cunning buyers avoid higher stamp duty by grossly inflating the supposed value of fixtures and fittings such as kitchen and bathroom units, wall-mounted ovens and walk-in cupboards, items that could be paid for separately to the seller.

Previously, buyers could send off a form with such purchase details to the Government's stamp-duty office. This fostered an incentive: by paying large cash sums (or at least claiming to) direct to the seller for fixtures and fittings, a buyer could then spend a lot less for the price of a home, and avoid the higher stamp-duty tax band. Much of this practice took place in protest at Government rules on stamp duty, still in place today.

Buy a house at £249,999 and your tax bill at 1 per cent is £2,499; choose one next door priced just £1 more at £250,000, and the higher 3 per cent stamp rate will set you back a chunky £7,500.

So what's different now? Stung by the tax loss, the Government clamped down in 2003 and forced solicitors or conveyancers to take the reins; a simple process turned overnight into a complex six-page test that must now be seen by tax officers.

This has curbed the worst practices but left uncertainty hanging over what can be a legitimate practice, says Richard Morea of broker London & Country. "It's a legal move as long as the sum you pay for fixture and fittings is realistic; if you're buying a big house in an expensive area, these could be worth a lot of money," he says. If somebody left an Aga, wall cupboards and fitted kitchen, then it could add up to thousands that you pay separately, he adds. "But if you're buying a one-bedroom flat, it's not going to work."

So if the fixtures and fittings are truly worth £17,000, you'll be fine. However, warns Melanie Bien of broker Savills Private Finance, "those buying just under the thresholds of £250,000 and £500,000 are most likely to arouse suspicion and possible further investigation". If the tax man suspects that you have deliberately dipped under a stamp-duty threshold, alarm bells can still ring, so make sure your fittings have an accurate market value.

A final tip: Why not offer £248,000 all-in? With prices still falling – 0.4 per cent in November, says Nationwide – it's a buyer's market.

Discover more property articles at Homes and Property
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Pharmaceutical Computer System Validation Specialist

£300 - £350 Per Day: Clearwater People Solutions Ltd: Pharmaceutical Computer ...

High Level Teaching Assistant (HTLA)

£70 - £90 per day: Randstad Education Birmingham: Higher Level Teaching Assist...

Teaching Assistant

£50 - £80 per day: Randstad Education Birmingham: Randstad Education is the UK...

Senior Java Developer - API's / Webservices - XML, XSLT

£400 - £450 Per Day: Clearwater People Solutions Ltd: Our client is currently ...

Day In a Page

A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments