Crackdown on stamp duty thefts

Failure to file forms will mean a £100 fine

Homebuyers who try to avoid paying their full stamp duty charge face a tough new regime from 1 December.

The introduction of the stamp duty land tax will require homebuyers to fill out a self assessment form on tax.

As a result the taxman will be able to scrutinise house sales for up to nine months after the completion date.

Homebuyers who pay over the odds for fixtures and fittings in return for the sale price being kept below a Stamp Duty tax threshold are being targeted.

Penalties

Stamp duty - which fills Treasury coffers to the tune of an estimated £7.6bn a year - is being replaced by stamp duty land tax on 1 December.

In most cases the lawyer should take on the extra work of ensuring the right forms get to the Revenue Stephen Quest Grant Thornton

The change will not mean that homebuyers have to pay more to the taxman as all thresholds and tax levels remain the same.

But from 1 December the onus will be on the homebuyer to ensure that a self assessment form - outlining the details of the house sale - is completed and filed with the Inland Revenue within 30 days of completion.

Failure to file will incur an automatic £100 penalty, which rises to £200 if not paid after four months.

But according to Stephen Quest, tax partner at accountancy firm Grant Thornton most homebuyers will not have to cope with the changes themselves.

"In most cases the lawyer should take on the extra work of ensuring the right forms get to the Revenue."

"Having said that, it will be easier for the taxman to scrutinise sales for the overvaluing of fixtures and fittings and the structuring of a sale to avoid paying a higher rate of stamp duty," Mr Quest said.

However, the Inland Revenue's real target are companies rather than individuals.

Business dodges

The new regime will put an end to many tax dodges employed by business.

For example, stamp duty is not paid on a property transaction until the final stage of completion when the legal title is transferred.

In order to avoid paying the duty many firms pay for a property but do not file all the paperwork to legally complete the sale - a process called "resting" in tax circles.

The new rules mean tax will have to be paid when money changes hands.

In addition, the new rules on leases will require most businesses to pay an upfront sum equivalent to 1% of the total rent payable over the life of the lease.

As a result, if the lease is a long one then businesses could baulk at the large upfront cost - at present firms only have to pay a percentage of average annual rent.