A London estate agency says one of its buyers wants to delay completion until November 1 “just in case stamp duty is changed in October”.
Aylesford International director Brendan Roberts says one of his firm’s buyers made the request following speculation that stamp duty could be lowered by Chancellor Sajid Javid.
“Anyone looking to sell is unlikely to conclude a sale much before late October even if they found a buyer early September, so agreeing a delayed completion to allow for any changes in SDLT shouldn’t create too much inconvenience and with buyers thin on the ground it is useful to be flexible and adapt to help buyers commit” explains Roberts.
The move follows widespread speculation by government ministers that stamp duty will be reformed - but without saying when or how.
Other agents report alternative tactics pursued by purchasers keen to avoid paying more SDLT than they need - but these raise questions over whether conveyancers would help.
“We have had a pronounced increase in enquiries from clients seeking to utilise the existing ‘mixed use’ stamp duty concession. This concession is still not well understood but can yield dramatic savings on higher value properties” explains Gideon Sumption of Stacks Property Search.
“There is a huge and obvious incentive to look at mixed use property where the maximum rate of SDLT is five per cent. There is no current legal definition but such is the amount of money involved there will almost certainly be some case law soon” Sumption continues.
“The current understanding is that for mixed use SDLT to apply, the property needs to have a commercial element, namely enjoy commercial income from land or buildings that from part of the whole. This could be a self-contained annexe let on an assured shorthold tenancy, some pasture let to a farmer or some buildings let as workshops. What won’t qualify are extensive grounds used purely for the enjoyment of the house.”
Another Stacks agent, Bill Spreckley, says buyers are becoming “more and more aware “ not only about the mixed use option but also how so-called ‘multiple dwellings’ can attract lower SDLT.
“If you buy a property with 'Multiple Dwellings' - that is an annexe, cottage or flat - then there are discounts available. One takes the price of the whole property, divide it by the number of properties, work out the SDLT per property and then multiply that figure by the number of properties again” he says.
He says a principal property sold with two cottages counting as ‘multiple dwellings’ - each sold at a notional £666,666 - would attract stamp duty of £69,999 but sold as one unit at £2m it would incur SDLT of £153,750.
“Some conveyancing solicitors are perfectly happy to proceed under these terms, but others are much more reticent, probably because they don't understand the rules well enough or have never done it before” suggests Spreckley.
In recent weeks many agents have expressed concern that government speculation over stamp duty changes could hit the autumn market with buyers waiting until there is clarity on the issue.
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Some thoughts from a Tax Specialist:
"Whether the rate of SDLT will be lowered is pure speculation, as is the implementation time-frame of any change - in my view it is better to have concluded a contract before any change (where the natural course of the purchase allows for it) so that any transitional provisions could benefit the purchaser if the change is unfavourable. If the change is favourable, then the contract entered into before the change could be substantially altered so as to escape any transitional provisions and therefore benefit from the more favourable rates (assuming that any transitional provisions take the form of those previously implemented in SDLT changes namely the introduction of the surcharge).
I would never recommend any conveyancer delay a purchase on the basis of such speculation as there is no evidence of what, if any, changes will occur and if indeed there are changes, conveyancers should be extremely careful to avoid committing a client to a purchase under a new tax system which is not fully understood (the legislation may well still be in draft stage) - proven by the extreme rise in negligence cases further to the introduction of the surcharge (which had a 6 month lead time, unlike FTB-relief)."
A reduction in stamp duty would mean an equal rise in selling price. All subsidy on land value adds to rent. All tax on land reduces rent. Selling price is the capitalised annual rental value (5% rate). So any wait by the buyer would command an equal wait by the seller. You might see a little distortion around the transition period but that would be a matter of luck or skilled timing by either party.
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