Stamp duty changes clamp down on avoidance
Homeowners face tougher rules on the level of stamp duty they pay, as new legislation comes in today, stopping people from exaggerating how much they pay for fixture and fittings.
The government is concerned that homebuyers are avoiding paying stamp duty by exaggerating how much they pay for fixtures and fittings.
People exaggerate the cost of carpets and curtains in an effort to get the home they are buying into a lower tax band. Stamp duty is paid at one per cent on homes valued at less then £250,000, three per cent on homes less than £500,000 and four per cent thereafter.
The practice of over-valuing fixtures and fittings can lead homebuyers to save large sums of money on the tax they should be paying.
From today, homeowners will have to submit a new Land Transaction Return form to the Inland Revenue within 30 days or face a fine of £100. The fine increases to £200 if the tax bill is not paid within four months of the sale.
Tax inspectors will be able to investigate the transaction up to nine months after the sale if they feel that exaggeration has occurred to avoid the tax bill.
Stamp duty currently accounts for five per cent of the Inland Revenue’s tax receipts and the Government hopes that the new rules will mean that it can increase its revenues during a period of high property transactions.
The reason why there is so much avoidance at present, is that the present stamp duty is a voluntary tax on documents. The changes will mean that in future stamp duty will effectively be a compulsory tax which is self assessed.
The changes to the tax regime also hope to combat tax avoidance by businesses. Companies are meant to pay stamp duty at the end of a property transactions. However, many businesses do not complete the final stage of the paperwork to avoid paying the tax.
The new rules will mean that businesses will have to pay the stamp duty when the money for the property changes hands.
