Emyr Pierce

I have finally found a house I wish to buy, the owner of which is keen on buying my own property. If we do a “swap” will I make a substantial saving in Stamp Duty Land Tax?

Sadly the answer is no. It has been many years since the Inland Revenue introduced the rule in which Stamp Duty Land Tax (SDLT) is no longer payable on the “Equality of Exchange” being the term used for the difference between the two sale prices.

Previously, the former Stamp Duty was only payable on the Equality of Exchange, which made exchanges of properties between interested parties a cost-effective and attractive proposition.

When you consider the extent of revenue lost by the Inland Revenue to such transactions this is hardly surprising. A sale of a property at £400,000 would attract tax of £12,000 which, when swapped for a property worth £300,000, the duty of which is £9,000, would have previously resulted in no Stamp Duty payable and a saving of £21,000 as the “equality of exchange” of £100,000 would, of course, have been exempt from Stamp Duty Land Tax.

The current rule, therefore, is that Stamp Duty Land Tax is assessed separately on each property based on the two figures quoted.

I am interested in buying a property for £255,000 but am concerned about the stamp duty issue. Can I do anything to minimise stamp duty payable?

The price of £255,000.00 is just over the first stamp duty threshold where Stamp Duty Land Tax (SDLT) changes from 1% to 3%. In other words for the extra £5,000 it is costing you an extra 2% on the overall price.

One way around this is to agree a genuine apportionment of the purchase price as to, say £250,000 for the house and £5,000 for fixtures and fittings which are included in the sale. Please note, however, that this apportionment must be entirely genuine and realistic otherwise it amounts to a fraud of the Inland Revenue.

If you can justify the cost of fixtures and fittings to the tune of £5,000 - and there is no benefit to a seller in participating in any potential fraud – then you will pay £2,500 in Stamp Duty, rather than £7,650. That’s a saving of £5,150.

I am hoping to part exchange my house for a new one. I have heard that this is a good way of saving stamp duty. Is this true?

Unfortunately it is not true. Some years ago Stamp Duty, as it was then, was only payable on the “Equality of Exchange”. This was the difference between the sale and the purchase prices and proved popular in the last recession when property developers were finding it difficult to sell new properties and the Stamp Duty savings were a popular attraction of part exchange schemes.

The new regulations governing Stamp Duty Land Tax (SDLT), as it is now, has removed this major benefit in the case of part exchange transactions. Stamp Duty Land Tax is payable on the value of the asset being acquired – regardless of whether it is being part exchanged for an existing asset.

Accordingly, SDLT will be payable on properties where the price exceeds £175,000.00 and not on the “Equality of Exchange” between the two part exchange values.

* Emyr Pierce is Managing Partner of Emyr Pierce Solicitors in Rhiwbina, Cardiff, Western Mail Conveyancer of the Year, specialising in Domestic and Commercial Property. Contact www.emyrpierce.co.uk or email law@emyrpierce.co.uk