Is buying chattels a legal way to lower stamp duty costs?

Our lawyer Fiona McNulty explains stamp duty thresholds and the practice of paying for chattels to lower the asking price of a property
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© Merrily Harpur (merrilyharpur.co.uk)
Question: My son is buying his first flat — for £410,000 — and having recently got divorced I’m buying my first home in my own name.

I am paying £2.05 million for a place in Fulham. The agents in both cases are being very vague about stamp duty and mine says I should pay some of the purchase price for “chattels”, presumably to lower the asking price below £2 million. We both need to budget, so what’s going on? And will we get a stamp duty discount as first-time buyers?

Answer: For a start, neither of you is entitled to any stamp duty exemptions as first-time buyers. You are probably thinking about help that was available to first-time buyers from March 25, 2010 to March 24 this year where the amount paid for a property was below £250,000. That’s now over.

Your son will pay three per cent of the purchase price (£12,300) in stamp duty, as the cost of his flat is in the band between £250,000 and £500,000. You will pay seven per cent of the purchase price (£143,500) as the price of the property you are buying is more than £2 million.

The estate agent is suggesting a payment for chattels so the price for the property is below £2 million and would thus fall within the lower band of over £1 million to £2 million, which then attracts stamp duty of only five per cent. HM Revenue and Customs deals with the payment of stamp duty and may very well scrutinise a transaction such as yours, which is borderline.

I would recommend you only do as your estate agent suggests if a detailed inventory can be prepared showing the true value of the chattels, which is accepted and agreed by the seller and annexed to the contract.

What's your problem?


If you have a question for Fiona McNulty, email legalsolutions@standard.co.uk. We regret that questions cannot be answered individually.

Fiona is a partner in the residential real estate team at Thring LLP www.thrings.com.

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