When one and one make... erm, three

Our lawyer Fiona McNulty looks at the higher rate of stamp duty tax when a linked transaction takes place.
Click to follow
legal cartoon
© Merrily Harpur
Question: My wife and I are buying a pair of semi - detached houses from a developer. We will live in one and my parents will live in the adjoining semi. We are paying £160,000 for each property and we are due to complete the purchases on April 27.

Our solicitor has said stamp duty is payable on £320,000 at a rate of three per cent, rather than one per cent on £160,000 for each house. However, my mate says our solicitor has got this all wrong, so how much should we be paying?

Answer: Stamp duty is a tax on transactions in land and is calculated according to the price paid for the property or land in question. As you are buying two properties from the same seller you are involved in linked transactions and will pay a higher rate of tax.

The aggregate value is £320,000 and so stamp duty is payable at the rate of three per cent, that is £9,600. The reason is this: the Finance Act 2003 states that transactions are linked if they form part of a single scheme, arrangement or series of transactions between the same seller and buyer, or in either case, persons connected with them.

Your friend could be thinking of the new rules announced in the Budget which provide relief for buyers of residential property who acquire more than one property. In such cases stamp duty will be calculated on the average consideration, so you would add together the price of each semi, which amounts to £320,000, and divide that sum by the number of properties and so would pay stamp duty at the rate of one per cent on each property at £160,000, that is £3,200, so a saving of £6,400. However, these new rules will not help you - they are not yet in force as they are awaiting Royal Assent.

What's your problem?

If you have a question for Fiona McNulty, please email legalsolutions@standard.co.uk or write to Legal Solutions, Homes & Property, London Evening Standard, 2 Derry Street, W8 5EE. We regret that questions cannot be answered individually but we will try to feature them here. Fiona is a partner in the residential real estate team at Thrings LLP (thrings.com).

Follow us on Twitter @HomesProperty, Facebook and Instagram