question on stamp duty and seperate contracts

B

blazesoftware

Guest
Hi,

My question has sort of been answered in this post but maybe someone could expand on it.

I am looking to buy a commercial premises where there are 2 contracts (one for land and one for building - the developer is doing it this way to have low stamp) but I'm told I will have to pay stamp on the land and building costs. The person I am buying the land from will also employ the builder so my I'm told it is a related contract even though neither contract mentions the other.

What are my options. I'm guessing its the person mentioned on the building contact rather than the builder that matters.

Also what if I could get one of the part development team to be on the land contact and the other on the building. Would that be ok. They would be involved in the overall development but on contract it would be separate people?

Any other options? I heard that if I buy the land and don't sign a building contract for maybe 3 months that this might be ok but all I get are "mights". I can't get a definite answer from revenue.

All help welcome.
Thanks
 
If I'm wrong, please correct me, but it sounds to me that you are buying a premises and also contracting to have a building built on it by the same partnership or company- its not clear from your post which. And it sounds like the buying of the land is contingent upon you entering a contract with the developers to build your premises on it. So if that is the case,stamp duty is legitimately due on the over all price...by trying to have seperate contracts which dont mention the building agreement etc you are effectively trying to defraud the revenue...be careful.
 
No I'm not trying to defraud. Just trying to clarify some grey areas. I know if I buy the land from one person and then contract a builder to build I only need to pay stamp on the land. I think if the person building it is associated with the land them I must pay stamp on it all. Its 2 seperate contracts by the developer, one for the land and one for the building as they are saying lowered stamp due to a land contract.

Revenue seem to say that since the end goal is a completed property then stamp is due on whole amount but only becuase the land seller and developer are related.

The two contracts are seperate and neither is contingent on the other.

The post I refer to above states "If there is no connection between the vendor of the land and the builder and if the purchaser genuinely employs the builder to build, then they are not related contracts. "

So I assume from that then stamp is only due on the land?

PS I should say I am just looking for information as I get conflicting information depending on where I look. I just want to know the facts so everything is fully legit.
 
The two contracts are seperate and neither is contingent on the other.
Click to expand...
So you're going to go ahead with the build project regardless of whether you are successful in buying the site or not - right?
 
Its an interesting question- I guess if you put the building contract out to tender and the successful party was the developer you happened to be buying the site from then you would be able to make a good case to the revenue- perhaps you should consider doing this?
 
i came up against this recently.
we are buying two attached semis and my solicitor was concerned about this related contract issue . her initial sugggestion was for me to buy one and mrs to buy the other. we preferred joint names on both so got her to ring the revenue stamp duty section for clarification while we were in her office. the girl in revenue said that if they were seperate contracts, not conditional upon each other , for seperate properties which could later be sold off individually then we had 2 seperate transactions.
my feeling about your situation is that the 2 deals would be deemed related unless you could prove absolutely that the build work had been tendered, and even then it might still cause you problems as the tendering process might be considered a sham.
 
Its a difficult one as it all down to Revenues perception. They will tell you one thing on the phone but wont give it in writing.
 
In all matters relating to alleged tax avoidance transactions, the burden of proof is on the taxpayer to convince that the transactions were kosher. It would be extremely reckless for anyone to proceed with such a transactions unless they had cast-iron guarantees that everything was in order.
 
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