The following is a conversation between David Anderson, at Sykes Anderson LLP Solicitors and Chartered Tax Adviser, and a property purchaser. They discuss ways of not paying stamp duty on completion.

Please note that tax and property law are complex subjects and you should not rely on this article without professional advice on the facts of your case

Q. Stamp Duty avoidance schemes are expensive and complex to implement and are often of dubious legality. Is there anything straight forward I can do which is legal beyond any doubt?

A. Yes. Do not pay the Stamp Duty for a year after completion.

Q. Doesn't the Buyer have to pay the Stamp Duty Land Tax (SDLT) on the date of completion of the purchase transaction?

A. No. A buyer only has to submit the SDLT return and pay any SDLT within 30 days of completion.

Q. Can the Buyer be registered as the owner at the Land Registry without paying the SDLT?

A. Yes. The Land Registry only requires the submission receipt to register the transfer. A submission receipt is obtained when the SDLT return is submitted online. SDLT is paid following submission of the SDLT return.

Q. What happens if you do not make the payment to the HMRC?

A. If you do not submit your SDLT return within the prescribed 30 days, you will have to pay an automatic fixed penalty. The amount of the penalty depends on how late you submit your return. If you submit it:

• within three months after the submission date the penalty is £100
• more than three months after the submission date the penalty is £200

Provided that you have submitted the return you will not be liable to a fixed penalty. However, you will have to pay interest on the amount due, at 2.5% APR, from the day after you should have paid it until the date when you actually pay it.

Q: What happens if the SDLT is not paid after a year?

A: You may have to pay a tax-based penalty as well as the fixed penalty. The tax-based penalty can be up to the full amount of the tax due on the return.

Any unpaid SDLT is a debt and can be recovered by the HMRC via normal way, i.e. statutory demand on the taxpayer which could ultimately lead to the bankruptcy and/or charging order over the property.

Q: Do you need to have the SDLT monies before completion?

A: No. However, some solicitors will insist on having the monies for the SDLT on account prior to completion. This needs to be discussed with your solicitor at the outset.

Q: Can the solicitor refuse to complete without the monies for the SDLT prior to completion?

A: Yes, especially if there is a lender involved. Generally, a solicitor acts for both the lender and the purchaser. Where a solicitor is acting for a lender they must act in accordance with the Council of Mortgage Lenders (CML), which insists on the solicitor having sufficient funds to complete the transaction before it will authorise them to release the mortgage money.

Q. So if I am a cash buyer and can get a substantially better return on my money for a year than 2.5% APR I should ask my solicitor about paying the Stamp Duty a year after completing?

A. Yes.

Q: Can I submit my own SDLT return?

A: Yes. However, you will need to send the submission receipt to your solicitor in order for them to register the transfer at Land Registry.

Q: If no SDLT is paid, can the buyer sell the property on?

A: Yes, but the original buyer will remain liable for the SDLT.

Q: Will the new buyer know that SDLT has not been paid?

A: Not unless there is a charging order over the property which is very unlikely for at least a year and will probably take HMRC about two years. You will be under an obligation to tell the buyer no SDLT has been paid but it cannot affect his good title.

Q. Are there any other ways of delaying payment of Stamp Duty?

A. Yes. A buyer can submit an application to the HMRC to defer the SDLT payable on a transaction. There are two occasions on which the HMRC will approve such an application. Where the whole or part of the price:

• is contingent or uncertain; or
• becomes payable or may become payable more than 6 months after the effective date of the transaction.

The former is aimed at developers, where the purchase price is based on the successful planning application - i.e. overage. The latter is more general and will most likely happen where the transaction is not at arms length say if a son is buying a property from his father with the price to be paid in a few years time depending on the son's financial circumstances

April 2011

David Anderson
Sykes Anderson LLP
9 Devonshire Square
London EC2M 4YF

www.sykesanderson.com
david.anderson@sykesanderson.com

Telephone + 44 20 3178 3770