Q I have put in an offer on a flat with a sale price of £255,000. I hadn’t realised until I made the offer that I will have to pay £5,150 more in tax than if the sale price were £250,000. Is it possible to go back to the vendor and agree some way of making the actual purchase price less while agreeing to buy appliances and other fittings separately? Is this legal?A It is true that the jump from stamp duty of one per cent of the purchase price (on home purchases of more than £60,000 and up to £250,000) and three per cent (on those of more than £250,000 and up to £500,000) is quite a leap and seems most unfair to those buying at just over the threshold. And although many have criticised the current rates of stamp duty, and the treasury is said to be working on reform, it is still the purchaser’s responsibility to pay the rate that pertains to the actual purchase price of the property.
Stamp duty is paid on the price of the property in respect to the transfer of land. Therefore a purchaser (with the agreement of the vendor, of course) may negotiate the separate purchase of any fixtures, fittings and other chattels which are to be left at the property. Keep in mind, however, that the Inland Revenue are vigilant in respect to property transfers and no doubt pay particular attention to transactions at the top end of each threshold. This must not be simply a case of assigning a nominal price to items above and beyond their actual value. Misrepresenting the actual cost of the items in question constitutes tax fraud, which carries penalties far beyond the amount of money you are trying to save here.
Don’t even think of entering into such an arrangement unless the value of the items in question is accurate and clearly demonstrable. Stamp duty should be factored in as an unavoidable cost as part of a property purchase – and many would say that if you can’t afford this level of stamp duty you are buying out of your price range.
Q I accepted an offer on my flat which was the asking price suggested by the agent. I was told this was ‘subject to survey’ but based my own offer on a new house on what I could afford given the sale price. My buyer has now had his survey, which has come up with several problems with the property, all very minor. He now wants me to drop the price by £3,000, but this would make me unable to afford the house that I am moving to. What should do?A It seems you haven’t much of a choice. If you can’t afford to buy if you drop your price by £3,000 it seems you have nothing to lose by telling the buyer that you are not prepared to go lower.
If he was interested enough to make a full asking price offer in the first place then he probably will not wish to lose the property now. A survey will always throw up something, but if these are all minor in nature you have to ask precisely what he was expecting for his money. If, for example, the place needs decorating inside or out then the agent would have taken this into account when setting the sale price. The buyer would be getting a double discount if you were to drop the price now. If the problems outlined by the survey were unexpected then you may have to be more reasonable, but only you can decide how reasonable you can afford to be.