The sale contract is drafted with specific amendments.
1. The contract becomes assignable, and uses a nominee company to stand between the Seller and the Buyer. This company is wholly owned by the Partners of our nominated solicitors and is usedsolely for the purpose of the Stamp Duty Scheme.
2. We ensure that under the terms of the contract the initial purchaser cannot ever complete under thecontract, this means that a chargeable interest cannot accrue. Legislation stipulates that for a transfer of land to be subject to stamp duty it must be substantially performed, this means that 90% of the consideration of the contract must be paid from the buyer to the seller. In order to avoid triggering substantial performance, at the point of completion the buyer (the nominee company) pays 85% of the purchase monies to the seller, the buyer then exercises it's right to assign the contract to the 2nd buyer (you- the client).
The fact that only 85% of the purchase price has been paid means that the contract has not been substantially performed, and therefore no Stamp Duty is due on this payment. When the contract is assigned the remaining 15% is made to complete the purchase, this second payment is subject to Stamp Duty.
A recent example case- Purchase of a property for £750,000
The first payment of £637,500 is made and is Stamp Duty exempt.
The contract is assigned and a second payment of £112,500 is made.
This payment is subject to stamp duty at the prevailing rate.
Under £125,000. - 0% as opposed to 4% of £750,000 hence an initial saving of £30,000.
The fee for this is 2% therefore actual amount paid is £15,000 and £15,000 has been saved legitimately and with no risk!
The initial purchaser can be substituted by someone nominated by the client, but this person must not be related to the transaction. This scheme takes account of legislation changes made in the pre budget of December 2006 and in particular s75A Finance Act
