Currently, stamp duty is payable on property valued at more than £125,000. But it is possible to avoid paying stamp duty even if your house is valued at more than this threshold, thanks to a hidden clause in the quagmire of Inland Revenue bureaucracy.
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Look to disadvantaged areas
In November 2001, the chancellor of the exchequer announced the government's intention to exempt certain disadvantaged areas of the UK from stamp duty, where the value of the house is under £150,000. The 1,736 disadvantaged areas are in both rural and city locations, all over the UK. Some are obvious, such as run-down areas of London and Manchester, and others are in less likely locations. For example, there are a few in the picturesque villages of Cornwall and Scotland. And in some cases one side of a street may be exempt from stamp duty, while the other has to pay. To see a list of designated areas exempt from stamp duty, see www.inlandrevenue.gov.uk/so/disadvantaged.htm
Be aware of the loophole
Most estate agents and solicitors are unaware of this loophole, and consequently many buyers have paid stamp duty unnecessarily. There have even been rumours that solicitors have been informing clients that they must pay the charge, even though they are exempt, just to get their cut of the revenue.
So if you are buying a property now, it is worth checking with the taxman, since the exemption is not automatically applicable - you have to apply to the Inland Revenue for the relevant forms. If you bought in a disadvantaged area between 2002 and now, there is a possibility that you may qualify for a refund.
The information required to get the exemption includes the full postcode of the property, a photocopy of the transfer document and a copy of the contract, or sale agreement. A solicitor will then be able to get a certificate confirming that the property is within the provisions of the Section 92 Finance Act 2001, which can be sent to the Inland Revenue.
The exempt areas are classified under government wards, which do not always correspond with local names for the area, so if you aren't sure whether your house is exempt or not, try the stamp-duty calculator. www.easyconvey.com/stampduty
Knowing whether your property is exempt is not just useful for buyers, it can also help when it comes to selling up, and several canny estate agents are now advertising the fact on property details.
Benefits for investors
The rule has also attracted investors buying six or more properties, who are allowed stamp-duty relief on any transaction within a disadvantaged area, even where values may exceed the limit of £150,000 for residential property.
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This article was last updated on 16 August 2006