Developers paying stamp duty on new build.

BennyC · 22 Mar 2011 at 19:43

Apologies for another house related thread.

I've agreed a deal with my developer and paid my reservation fee back in February. My valuation is done (based on the show home) and I was ringing up to renegotiate today. However I was re-educated on what my house is actually costing me.

My logic was that the 'purchase price' of the property doesn't include stamp duty. In that for example a £275,000 house would actually cost you a further £8250 (3%) in stamp duty and so your grand total is £283,250 (plus solicitors fees).

My developer is claiming that my stamp duty 'saving' (the cost) will be deducted from the actual purchase price.

So if we use these figures as I don't wish to disclose my own. Instead of not having to pay £8250 extra for stamp duty and the cost to you for the house remaining at £275,000 they are claiming that the actual cost is £266,750, deducting the cost of stamp duty from the purchase price. My paper work shows my purchase price as the amount before any stamp duty has been added/deducted. This to me seems more like what they're going to receive from the sale of the property rather than what I pay.

The seems very odd to me. Further more stamp duty has been calculated on the full price (e.g, £275,000 not what they claim I would pay £266,750 *if these were my figures*) Unfortunately they were closing so my call had to be cut short so I couldn't get any more details.

Has anybody had this incentive on a new build or any experience of this? as this sounds very bizarre to me and I don't fancy being slipped one by the developer.

Thanks

BennyC

Edit: In other words when stamp duty is paid for by the developer is it deducted from the gross price of the property?

Greebo · 23 Mar 2011 at 10:34

I think what they are saying is this:

They sell you house for £275,000

Your solicitor pays the stamp duty of £8,250 to the government but then only pays the developer £266,750 for the house as the stamp duty is discounted.

krooton · 23 Mar 2011 at 10:44

Greebo said:
I think what they are saying is this:

They sell you house for £275,000

Your solicitor pays the stamp duty of £8,250 to the government but then only pays the developer £266,750 for the house as the stamp duty is discounted.

Sounds about right.

NathanE · 23 Mar 2011 at 11:13

If you're a first time buyer the stamp duty is 0% for the first 250k of the property value, until March 2012.

BennyC · 23 Mar 2011 at 11:22

I cleared things up with them this morning.

There was some confusion where I thought I was paying their net price, which would be purchase price minus stamp duty and fees, so what they clear from the sale. When in actual fact it is the purchase price agreed.

Silly bint told me completely the opposite yesterday!

londonbairn · 23 Mar 2011 at 11:26

NathanE said:
If you're a first time buyer the stamp duty is 0% for the first 250k of the property value, until March 2012.

Stamp Duty is not tiered like income tax; you will pay 3% of the whole amount

BennyC · 23 Mar 2011 at 11:54

Stamp Duty is tiered based on purchase price of which the government have waved for first time buyers on purchases up to £250,000.
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4015918

Ev0 · 23 Mar 2011 at 12:17

BennyC said:
Stamp Duty is tiered based on purchase price of which the government have waved for first time buyers on purchases up to £250,000.
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4015918

But it isn't tiered like income tax in that you don't pay a lower rate on the first 250k on the house, then the higher rate on anything over.

If the house is over 250k, you pay the full 3% on the whole lot.

Whereas with income tax you pay nothing on the first x thousand, then 20% on the next y thousand, and so on.

krooton · 23 Mar 2011 at 12:17

Stamp duty does annoy me given that:

Buy a £300k house, pay £9k stamp duty. Sell it 3 months later for the same price, new buyer pays £9k. 3 months and the government makes £18k for doing naff all.

Vonhelmet · 23 Mar 2011 at 13:10

krooton said:
Stamp duty does annoy me given that:

Buy a £300k house, pay £9k stamp duty. Sell it 3 months later for the same price, new buyer pays £9k. 3 months and the government makes £18k for doing naff all.

It's a tax on stamping documents. The transfer of land requires a stamp at the Land Registry. Boom.

krooton · 23 Mar 2011 at 13:19

vonhelmet said:
It's a tax on stamping documents. The transfer of land requires a stamp at the Land Registry. Boom.

Is the stamp made of unobtanium?

Vonhelmet · 23 Mar 2011 at 13:49

krooton said:
Is the stamp made of unobtanium?

Haha, no idea. I know that for stamp duty on shares, the stamp ratifies the transfer in the eyes of the law, such that the stamped document is admissible in a court of law, so that's what you're paying for. I'm not sure whether the same holds true for SDLT.

krooton · 23 Mar 2011 at 13:53

vonhelmet said:
Haha, no idea. I know that for stamp duty on shares, the stamp ratifies the transfer in the eyes of the law, such that the stamped document is admissible in a court of law, so that's what you're paying for. I'm not sure whether the same holds true for SDLT.

Why should the value of this service change based on the price of the house, surely the process is the same?

Vonhelmet · 23 Mar 2011 at 13:54

krooton said:
Why should the value of this service change based on the price of the house, surely the process is the same?

SSSHHHH, YOU'RE GIVING THE GAME AWAY!

Pudney · 23 Mar 2011 at 13:55

krooton said:
Why should the value of this service change based on the price of the house, surely the process is the same?

Because it's worth more to the end user

krooton · 23 Mar 2011 at 13:58

It isn't even directly linked to the value of the house, but to what you agree to pay.

If the seller decides they would accept an offer £10k lower provided another requirement is met (say not completing for 120 days), and this drops you below a threshold, you pay less tax for the same property.

BennyC · 23 Mar 2011 at 14:03

Ev0 said:
But it isn't tiered like income tax in that you don't pay a lower rate on the first 250k on the house, then the higher rate on anything over.

If the house is over 250k, you pay the full 3% on the whole lot.

Whereas with income tax you pay nothing on the first x thousand, then 20% on the next y thousand, and so on.

Right you are