It is never easy predicting the effect of Budget changes but I am betting
that this year's hike in stamp duty will give rise to the “clip-on” home.
Only a few years back, stamp duty was levied at a flat rate of 1 per cent
on all house purchases of less than £60,000. The resulting bill was never
welcome but nor was it particularly painful. Certainly, it was not enough
to distort the way in which houses are bought and sold.
Today, things are very different. The rate on houses in the
£250,000-£500,000 range now stands at 3 per cent while anyone buying a
house for more than £500,000 will have to pay a staggering 4 per cent of
the purchase price. That is £20,000 on a £500,000 home.
Even before the Budget, there were signs that recent hikes in stamp duty
were beginning to distort the property market.
Peter Mandelson, the Northern Ireland minister and famed mortgage
aficionado, negotiated a deal in Notting Hill which came in just under the
£250,000 threshold. As a result, he avoided having to pay the higher rate.
In many parts of London and the South-east, estate agents are pursuing a
similar route. Instead of quoting a single price, they now have two -one
for the property itself and another for the contents.
The Inland Revenue is getting hot under the collar about this and has
warned that it will crack down hard on obvious cases of stamp duty
But the taxman has a problem. For years, he has been collecting more stamp
duty than he should have. Kitchens, bathrooms, carpets, cupboards, blinds,
curtains and countless other bits and pieces have commonly been included in
the price of a house when – in certain circumstances – they could been
accounted for separately.
With stamp duty at a lower rate until Labour came to power, such extras
were hardly worth worrying about. Nowadays, separating the contents of a
house from the property itself can make a considerable difference and there
is little the Inland Revenue can do about it.
If done carefully, I suspect that up to £100,000 of what is normally
thought of as the fabric of a property could legally be described as the
For every £1,000 accounted for in this way, between £10 and £40 will be
saved in stamp duty, depending on the sale price.
The trick is to make sure that the contents of your house are “removable”
and “deliverable”. This is the test which the taxman applies to establish
whether or not they form part of the fabric of a property.
In a practical sense, this means that nothing should be screwed or nailed
down – hence, my prediction of a “clip-on” interior furnishings boom.
As Mandelson would immediately grasp, kitchens and bathrooms are the most
important parts of your home to focus on as they are the most expensive.
Instead of being screwed, nailed or glued to walls or floors, things like
baths, toilets and kitchen units should sit as individual units on
brackets, pins or bolts that (like the fixtures for a mirror or painting)
can be easily undone.
Make sure, also, that your plumber uses screw fillings (as on your washing
machine) rather than welded joints.
To wind up the taxman further, do the same with shelves, floor coverings,
curtains, radiators, garden sheds and everything else you can think of.
Before long, you will be left with only the house which, after all, is the
only thing that should be attracting stamp duty in the first place.
I suspect also that you should calculate the value of your clip-on
contents before placing your home on the market. Advertise the house
itself, at say, £240,000 and the contents at £100,000 and you will be
saving the person who buys it a cool £7,800.
If your vendor does the same, the total saving will more than double.
Oh, and one last thing. If you are thinking about building a new house
from scratch, ask your builder about the availability of clip-on