Loopholes in the Stamp Duty Property Tax in the UK
The UK government (or any government for that matter) is always looking for a way to subtly take from the rich and give to the poor. In 2003, the UK government implemented a property tax called Stamp Duty, whereby property buyers have to pay a certain percentage of their house’s purchase price to the government. For more expensive property purchases of over £250,000, buyers are required to pay a 5% stamp duty. This works out to a substantial amount of money which has resulted in property buyers finding loopholes by which to avoid paying this tax. Yes, they do exist, and if you’re looking to purchase property in the UK any time soon, then here’s how you too can avoid paying Stamp Duty property tax – legally.
1. Create an SPV
SPV stands for Special Purpose Vehicle and basically refers to a small company or trust that is set up with your house as its sole asset. In order to avoid paying property tax on your house which belongs to your new “company”, you simply purchase all the shares available from your company and therefore indirectly own its sole asset – your house. This is a simple way of getting around paying Stamp Duty and is perfectly legal. More and more industry professionals and property developers are using this method to avoid paying massive amounts tax on property valued over £250,000. The only tax you have to pay on your shares purchased is a measly 0.5% which is required by law when purchasing company shares.
2. Purchase land, not property!
Another way in which property enthusiasts are avoiding the payment of property tax is to purchase land and then build property on the land, instead of purchase property. Stamp duty property taxes only refer to the purchase of property and not the building of property. More and more people around the UK and going this route when it comes to purchasing a new house. Not only do you save on property taxes, but you also get to build your very own style of house. Many construction companies around the UK are using this as a method by which to attract business. Construction companies are purchasing large amounts of land, and then selling the land to prospective buyers with an agreement to build the houses for them, which obviously results in business for the construction company as well as a the avoidance of property tax for the customer.
As mentioned before, there is nothing illegal in the way the above loopholes are carried out. These are simply ways in which property buyers are manipulating the law in order to benefit themselves. Obviously, authorities are aware of the loophole and will no doubt correct the issue as soon as possible, but for now, there are ways and means to get away with paying property tax.
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