Stamp Duty Land Tax
Stamp Duty Land Tax is a tax paid when buying a house above a certain value and is collected by HM Revenue and Customs (HMRC).
Your solicitor will usually prepare a financial statement before completion of your house purchase, and collect the stamp duty payment from you before paying this money to HMRC on your behalf. However, as the rules stand, if your lawyer doesn’t make this payment for whatever reason, it is still your responsibility; and HMRC will request the money from you along with interest and penalties if it isn’t paid. There is no way of avoiding payment. The Land Registry will not register the change into your name of the property without certification by HMRC of payment of the Stamp Duty.
Please read the following tips to ensure that you have a better understanding of the issues and potential risks.
1. Try and avoid any nasty surprises
Make sure you know from the start how much stamp duty you will have to pay. Speak to your lawyer in the first instance and then double check the amount payable yourself. You can use HMRC’s stamp duty calculator here. Once you’ve transferred the money to your lawyer, seek assurances that they have made this payment and don’t assume anything. Remember, ultimate responsibility for making sure HMRC receives the correct amount rests with you.
2. Consider getting like-for-like quotes
After completion (when you get the keys to your new home) your lawyer has to fill out paperwork to send your stamp duty payment to HMRC. Most law firms charge for this: typically £75 to £100 on top of their fees. Therefore a quote that is £50 cheaper on legal fees might not be cheaper overall if there is an extra £100 payable for filling out the stamp duty form. Do your homework.
3. Seek confirmation that your lawyer has met the 30 day deadline
Stamp duty has to be paid within 30 days of completion; otherwise a penalty fee is incurred. It may be worth checking with your lawyer a few days after completion that they have paid the stamp duty for you. If it isn’t paid within 30 days because of a problem with your lawyer, and you incur a penalty fee, make sure you complain to the lawyer in the first instance. If you’re unhappy with their response, then bring your complaint to the Legal Ombudsman.
4. Avoid the temptation to cut corners
Because stamp duty can be an expensive additional payment when buying a house, it can be tempting to look for ways to minimise it. Generally, be wary of any scheme offering to reduce your stamp duty liability – if it seems too good to be true it usually is. For example, paying £260,000 for a property with £249,000 apportioned to the house and £11,000 to a second hand mirror (which usually would not attract stamp duty) is unlikely to be legal. If in doubt seek advice from your solicitor and/or tax adviser
5. Be clear about lender or builder promotions and what they mean
Some mortgage lenders will offer to ‘pay your stamp duty’. Usually, this means the lender will send an extra amount, equivalent to the stamp duty, to your lawyer with the mortgage advance. Similarly, a builder may offer an allowance against the house sale price: for example, with a £200,000 house you pay the builder £198,000 so you have effectively saved the £2,000 stamp duty that you have to pay. In both scenarios it is still your responsibility to ensure the payment is made, so follow up with the mortgage lender/ builder and your lawyer to make sure everything has been sorted out.
20 June 2014
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances. (50587)