How to save stamp duty buying a home

Here’s a timely warning for property people who believe the tax man is a friendly and benign helper.

Gill Orsmann was buying a house and spent some time scrutinising the conveyancing documents drafted by her solicitor.

She realised that the Stamp Duty Land Tax (SDLT) forms included an overstated asking price as £8,000 of the cost of the house included chattels.

HMRC does not offer a list defining chattels, but offers some guidance to inspectors in an internal manual.

In are:

• Carpets
• Curtains and blinds
• Free standing furniture
• Kitchen white goods
• Electric and gas fires, provided they can be disconnected from the power supply without damaging the property
• Light shades and fittings that are not recessed

Out are:

• Fitted kitchen units, cupboards and sinks
• Gas and wall mounted ovens
• Fitted bathroom sanitary ware
• Central heating systems
• Intruder alarm systems
• Any plants, shrubs or trees growing in the soil which forms part of the land

A deduction is appropriate for amounts properly apportioned for plants growing in pots or containers.

Anything else considered a chattel is anyone’s guess.

In Ms Orsmann’s case, her solicitor recalculated the SDLT, taking out the £8,000, which moved the house out of the 3% band and in to the 1% – reducing the SDLT figure from £258,000 to £250,000 and cutting the bill from £7,740 to £2,500.

Her tax inspector looked at the forms and realised if he argued the fixture and fittings valuation was over valued by just £1, the purchase would be pulled back in to the 3% bracket, increasing the tax she paid by £5,000.

This is important to the tax man because incentive payments added to his wages are based on ‘lost’ tax clawed back by inspectors.
A determined Ms Orsmann then set aside another great chunk of time and money to value the fixtures and fittings, providing evidence that £7,200 worth were correctly valued. She was now arguing over £800 with her tax inspector.

The case ended before a tax tribunal, which ruled that worktops, cupboards and a door motor all in the garage were not fixtures and fittings but part of the building.

The result was Ms Orsmann had to pay the extra £5,000 stamp duty.

The lesson for homebuyers is to carefully value any chattels that make up part of the property purchase and deduct them from the SDLT value to save as much tax as possible – especially if the buying price is close to an SDLT threshold.

Also, don’t flag an effort to minimise tax with HMRC – a call or letter just means they will mark the case for closer scrutiny.

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