As interest rates surge and the cost of living crisis persists, people are seeking ways to cut costs in the conveyancing process, specifically by lowering their Stamp Duty Land Tax (“SDLT”) expenses. One solution could be to use a portion of the agreed-upon price as payment for chattels, but care must be taken when pursuing this strategy and the difference between chattels and fixtures must first be comprehended.
Fixture
In general, a fixture refers to an item that is affixed to the property.
Examples of fixtures include kitchen units, cupboards, sinks, agas, wall-mounted ovens, fitted bathroom sanitary ware, central heating systems, intruder alarms, plants, shrubs, and trees.
Payment for fixtures may be subject to SDLT since they are considered part of the land. HMRC will determine whether an item is a fixture by assessing the degree and purpose of the annexation, with more weight given to the purpose of the item.
Chattel
A chattel is an independent object that is not a part of the land and therefore, it is excluded from the SDLT calculation. While HM Revenue and Customs doesn’t offer a complete list of items that would qualify as chattels, some examples may include curtains, free-standing furniture, blinds, kitchen appliances that aren’t integrated, light fittings and shades, gas and electric fires that can be removed without damaging the property, and potted plants.
While it may be tempting to pay more than the fair value for the seller’s chattels in order to reduce SDLT liability, this should not be attempted. The fair value of the chattels may only be deducted from the purchase price, and this should be done on a just and reasonable basis. It is important to prepare a detailed list of the chattels and agree on it between the parties.
In the event of an investigation by HM Revenue and Customs, it may be useful to obtain comparable evidence, such as the going rate for a second-hand washing machine. For more unique pieces, like works of art, it would be advisable to seek a valuation from a qualified professional.
SDLT and probable issues
The area of SDLT can be complex and is a tax that is self-assessed. It is the buyer’s responsibility to ensure that the return is accurately completed and that any apportionment of the property purchase price to chattels is ‘just and reasonable’.
HM Revenue and Customs may investigate the accuracy of the return and apportionments to determine if the items were indeed chattels. Fraudulent over-valuation of chattels can result in criminal sanctions for the buyer and render the contract between the buyer and seller unenforceable.
Conveyancing Process
If you plan to purchase items from the seller, it is advisable to seek advice from a tax specialist. It is also important to discuss this matter with your conveyancer at the outset of the transaction to prevent any potential delays.
Disclaimer:
The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Connaught Law and authors accept no responsibility for loss that may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please don’t hesitate to contact Connaught Law. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Connaught Law.
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