How UK landlords and wealthy home buyers are avoiding property taxes

Lawyers call for clarification from the government

TRD WEEKEND EDITION /
Sep.September 23, 2017 03:53 PM

Thanks to a technical loophole, UK home buyers can avoid “tens of thousands of pounds” in taxes, according to The Telegraph. (Jacek Halicki)

Lawyers say they’ve found a technical loophole in the UK stamp duty tax laws: if buyers package their new home with a forested plot of land — even if the two lots are in different parts of the country — they could avoid “tens of thousands of pounds” worth of tax, according to The Telegraph.

The stamp duty tax is a government administration fee on any UK land purchase. The rate of taxation depends on the price and the buyer’s intended use. Any property over about $170,000 is taxed, with different rates for residential buyers intending on renting out their properties or purchasing a second home. Landlords pay a minimum three percent stamp duty tax on all purchased property up to a maximum rate of 15 percent.

Using the loophole eases taxes for landlords and second home-buyers because they can claim the deal is for a “mixed-use” property, not just a residential one. On a $6.7 million sale, buyers would have to pay almost $900,000 in stamp duty, but, if the buyers use the loophole and bundle a woodland into their deal, the tax falls to around $320,000, according to The Telegraph’s calculation.

Residential buyers inking expensive deals in London and for country homes outside the city are already using the loophole to pay less taxes, according to KPMG’s stamp duty expert Sean Randall.

“There are all sorts of niches to this. A buyer says to a seller ‘get me a plot of non-residential’ specifically to avoid stamp duty,” he said to The Telegraph.

Public news of exploiting this technical loophole comes on the heels of the UK being declared one of the worst markets for landlords and Moody’s downgrading of the country’s credit rating.

Whether the loophole stands up in court is another question; there has not been a publicly known case to test it yet, however lawyers are currently calling for legal clarification from Her Majesty’s Revenue and Customs, the government department in charge of administering taxes.

[The Telegraph] — E.K. Hudson


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