Understanding stamp duty can be extremely confusing at the best of times, but should you be buying more than one property, the issue becomes even more complex.
Howells Solicitors offers a brief overview to help you get to grips with stamp duty liability.
Linked Transactions
If a single party purchases two or more properties from the same seller, then this is known as a ‘linked’ transaction. For example, if a buyer were to purchase two flats from the same developer, or a house and a piece of land from the same seller, they would be considered linked transactions.
Should a person connected to the buyer, such as a relative or business partner, purchase a property from the same buyer, this transaction would also be considered linked.
HMRC also considers transactions to be linked if they are part of a single arrangement or scheme, or are part of a series of transactions.
Stamp Duty on Linked Transactions
The Stamp Duty Land Tax due on linked transactions is worked out according to the total value of all linked transactions, rather than on the individual value of each transaction.
This means that if you were to purchase two houses at a cost of £125,000 each, you would have to pay stamp duty on their total value, £250,000. As stamp duty is not payable on the first £125,000 of a transactions value, but is payable at 2% on the next Up to £125,000, the total stamp duty payable for these two properties would be £1250.
It is important to note that transactions are considered linked by HMRC if there is something to link all of the transactions together. There is no limit to the length of time between two transactions for them to be considered linked.
From the 1 April 2016, Stamp Duty Land Tax will increase by 3% on top of current rates for purchases of additional residential properties, such as buy-to-let properties and second homes.
Read More: Calm After Storm Caused By Stamp Duty Changes Might Help First-Time Buyers
Stamp Duty Exemptions
Stamp Duty is not payable on single properties or linked transactions with a total value below £125,000.
In recent years, HMRC have cracked down on Stamp Duty avoidance schemes such as paying for fixtures and fittings (chattels) separately or entering into complex trust arrangements to negate their liability.
These schemes should be approached with extreme caution, as not only are they not guaranteed to work, HMRC will investigate them and potentially an individual’s wider tax affairs.
Read more: Don’t Get Your Fingers Burnt with Stamp Duty Avoidance Schemes
Stamp Duty Thresholds
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