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bigduckontax
bigduckontax, Accountant
Category: Tax
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A commercial property was bought for £495,000 and £99,000 VAT

Customer Question

A commercial property was bought for £495,000 and £99,000 VAT paid for this transaction. Stamp duty on properties below £500.000 is 3% and above of it 4%. The property has a lease of 999 years. Tax Office adds £495,000 buying price with £99,000 VAT and demanding 4% stamp duty of £594,000 while we believed we will pay 3% stamp duty on £495,000. We have claimed back the VAT paid on the property. Could you advise if the Tax Office is using right stamp duty band please
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.
Stamp duty is often described as an unfair tax because it goes up in stages, one penny over the limit and it goes up by a mouth watering 1 or even 2%! I see your problem, by adding the VAT to the price the duty rose from 3% to 4%. As far as I can see the Stamp Duty Office is correct in the rate it is using. I have, in the past, used them many times and have never known them make an error. Your sole consolation is that you were able to recover the VAT as input tax which, I would gently point out, far exceeds the Stamp Duty Land Tax imposed.
As a side line the Boston Tea Party was not over import duty; at that time tea was the only import to North America taxed at all. It was a demonstration against the stamp duties, often horrendous, applied to almost any financial transaction. I am still old enough to remember 2p on every cheque and receipt issued and my own birth certificate has a 1p postage stamp affixed to it, an emergency war time revenue earning measure!
Sorry to have to bring news you probably did not wish ho hear.
Customer: replied 3 years ago.

Thank you for your reply,

Why I should pay stamp duty for the money which I have paid for VAT and recover later. Isn't it contradict with the nature f stamp duty which should be paid on purchase price.

Expert:  bigduckontax replied 3 years ago.

Much of UK taxation appears contradictory. SDLT is imposed on the consideration passed which in this case includes the VAT. Such transactions are relatively rare as VAT may well inflate the cost of land to such a level as it make it uneconomical to sell as many buyers are not VAT registered. If you do not pay the SDLT than you will have no valid title to the property.

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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.