Buying a finished house v buying site then building

D

deadlyduck

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Hi,

We are hoping to buy a new house (residential, not FTB) in a small development in SW Ireland. The house size exceeds 125 sq metres.

Due to certain modifications we require to be made to the plans used by the builder, we agreed with the builder that he should build ours on a newly acquired site within the development rather than buy an existing (finished) house. The builder had acquired the new site and offered it to us.

The structure of the deal (as proposed by the builder) is that we buy the site for €190,000 from the builder (by way of a 'sub-sale') and then sign a building agreement with him to build the house (total price of the whole lot €415000).

The problem, AFAI can see, is that this way we're going to be hit with 3% stamp duty on the site price as it exceeds the €127000 threshold.
I believe (perhaps incorrectly?) that this could be avoided if we were to either buy one of the existing houses for €415K or to simply agree a 'house building agreement' without a separate land purchase agreement. Alternatively, is it 'reasonable' to allocate , say, €120K for the site contract purchase (the builder shows a loss in this case on the land sale but would make an overall profit on the combined deal) and the balance of the €415K to the building agreement, thereby avoiding the stamp duty. Another idea I've tossed around is : could the builder legally subdivide the large plot of land into 2 smaller plots and sell them to me for €95K each, thereby avoiding stamp duty?

I'll be running these questions by both my solicitor and the builder but would appreciate any input in advance.

My query: has anyone else faced a similar situation? Is there any way that I can legally avoid the stamp duty?

Thanks for all replies in advance.
 
if you buy the new finished house, as a FTB and it exceeds 125sm, then you are liable to SD at a reduced rate, so either way you will have to pay SD, the question is what is the difference, and whether teh difference is worth it for the revised design you are getting.

The calculation of SD on a new house exceeding 125sq is based off something like the lower of the SD on the value of the site or a 1/4 of the full stamp duty. Revenue website will give exact caulcuation, so maybe there is no real difference in SD.
 
No, it is based on the higher of the two figures

"The stamp duty is assessed on either the cost of the site or 25% of the cost of the site plus the building costs (less VAT), whichever is the greater figure. This figure is called the Chargeable Consideration"

from
 
SOb and Ntoodeep:

thanks- ntoodeep is correct in how the SD is calculated.

However, I'm not yet sure that SD is unavoidable: if the contract shows that the site is valued at 120K (instead of 190K as currently proposed), couldn't sd be avoided, since the 127K threshold is not breached? The other question is: would it be legal to do this?
 
But by reducing value of site and thereby increasing value of building costs to retain the 415k overall, aren't you increasing rather than decreasing the chargeable consideration?
 
Ntoodeep- that's true, but remember that -where the house area exeeds 125 sq m- the SD is calculated on the greater of (a) site price or (b) 25% of net of VAT building cost.

The gross sales price (which should exceed the building cost) of the entire deal is €415K, therefore 25% of this amount (ignoring VAT etc) is only €103750- well under the €127K threshold. If the site price was valued at 120K as part of this €415K, wouldn't I avoid SD?

My big question is: is this legal to do?!!!!

Thanks for all input received to date.
 
Sorry, I got caught by this before on AAM also.
I read "25% of the cost of the site plus the building costs ..." as
"( 25% of the cost of the site ) plus the building costs ..."
rather than as
"25% of ( the cost of the site plus the building costs ... )".

So now I see your angle. In answer to your question, not legal I suspect, but no different to related debates on whether contents should / should-not be used to reduce value below a S.D. threshold.
 
We arrived at a very acceptable solution as follows:

The builder, being an investor, would have to pay 9% SD if he were to "own and sell" the site to someone. However, the structure of the deal (a 'subsale'- the deed he signed to buy the site has not yet been stamped and never will) is that he currently doesn't technically own the site (although he has paid the initial owner for it). So he can sell it to me and avoid the SD (9%=€17100). As purchasers, we'd still have to pay 3% (€5700) but he's agreed that he'll allow us this amount by way of an increased PC allowance for the kitchen! Everyone wins- he saves €11400 net and we effectively avoid the SD.
 
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