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Buy two get one fee!

As you might of guessed I watch a lot of TV. In The Apprentice this week one team were lambasted for only choosing low cost products to sell. Withering under Alan Sugar's gaze the team hung their head as he criticised them, "There were no star items" he growled - before telling them that they had won the challenge. There's a lesson in that, somewhere.

As much as I would love a star item in my property portfolio I know I'm essentially a risk adverse person. As such I have to balance out my desire for the property equivalent of a toy dinosaur that shows emotion (£195 from all good retailers), with the more practical side of me that thinks multicoloured ponchos at £9.99 are a safer bet.

So when having lost out on the incredible Glenn House it was somewhat of a surprise that a multicoloured poncho of a property came along.

Buried in the property paper this week was a 2 bedroom apartment, close to the town and the seafront for a ridiculously good price. With the two line description whetting my appetite I looked up the details online. But something was wrong. Online the price was £10k higher. With my mind racing with Trade Descriptions Act and Property Misdescriptions Act gobbledygook it actually took quite a while for the penny to drop and me to scroll down slightly further. So there were two flats! (I've always been smart like that) Both in the same building, both 2 bed. Both currently available with tenant in situ but on whom notice had been served. It would have been rude not to go and have a look.

The properties were lovely. Have I mentioned what a sucker I am for high ceilings, spacious rooms, original coving and ceiling roses? The maths added up and granted although I hadn't even been looking for one property I ended up putting an offer in on two. This (and my distinct lack of cash flow) is why I don't watch QVC.

Part of the condition of sale was that we would complete in 8 weeks. Which shouldn't have been a problem until the survey came back. Seriously - I have to get a different surveyor. All he does is rain on my parade. Once again I got a phone call asking me to come in for a meeting before he'll give me the official report. You know it's not going to be good news when he does that. And funnily enough it wasn't, the least of which was the giant subsidence crack that I'd obviously missed whilst admiring the ceiling roses.

We went back to the agent. Agents have a bad reputation. Slimy, money grabbing, lazy they may be (hey I was one once - terrible idea, like giving crack to an addict), but they perform a valuable service. Not only do they corral both properties and buyers but they give you that element of distance. It's one thing to tell your agent that you think the property was decorated by a blind person it's another to tell the homeowner themselves. So when we gave the agent the low down on what the surveyor had said the last thing we really wanted them to say was that they felt this would be best dealt with by a face to face meeting with the vendor. Eek.

Fair play the guy was brilliant and 6 months later we were able to buy the flats.

That was when the surprise kicked in. Stamp duty. Both of the flats were well below the stamp duty threshold, in fact that was one of the things that had made it so appealing was the affordability of the whole thing. By having two flats in the same block we were reducing costs in the fact that we didn't need two lots of searches and had a discount on the survey as it was the same building. So why the tax bill?

Apparently in the opposite way to which the supermarkets work, where you buy one get one free, the HMRC sees multiple purchases as if they were one.

The current level at which stamp duty is payable is £175,000. Buy a property less than this level and you don't have to pay tax, over this level and you do (granted there are exceptions) and depending on how far over this level depends on how much tax you pay.

So if you buy a property for £100k you're free and clear. But buy 2 and instead of it being treated as 2 purchases it's considered a linked purchase and you're liable in the same way as if the property came to £200k. Buy 3 and it's as if it came to £300k, pushing you into the 3% bracket.

The government guidelines on what constitutes a linked transaction are very broad, suggesting that if you buy multiple properties from a large company such as Barratt or Linden Homes even at different locations you may still be liable. Equally if someone who is "connected" (no don't ask me what that means either) to you buys a property from that vendor, or someone "connected" to that vendor, you may again be liable.

But, as Albert Einstein said, "the hardest thing in the world to understand is tax."

 For more information about linked purchases check out http://www.hmrc.gov.uk/sdlt/transaction/linked-transfers.htm

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