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Disbursements

Disbursements

Reducing tax through stamp duty mitigation

14/04/2017

The term stamp duty mitigation is a tax avoidance scheme that occurs during a property transaction. Buyers are usually expected to pay a tax after they fully purchase a house. This fee is paid for the benefit that the buyer gains upon buying a property. Taxes are payable for property values exceeding a given amount. Taxes are exempted for properties with non-taxable values, and for many first-time buyers. These taxes are usually very high especially if the cost of a property is high. The rates of taxes have been increasing over the past few years. This is the reason why many buyers opt to avoid the taxes.

Stamp duty mitigation is undertaken by solicitors either when working by themselves, or alongside accountants. These solicitors advertise their ability to help buyers avoid taxes in cryptic media. This is because the government is very strict about tax evasion and will prosecute anyone who engages in this behaviour. There are many ways in which solicitors can help you avoid paying taxes. The solicitors who engage in stamp duty mitigation never disclose their methods of mitigation to buyers unless the buyers sign Confidentiality Clauses or Non-Disclosure Agreements. Some solicitors entice their clients into tax avoidance by promising them that they will not charge solicitor fees if the scheme fails. This together with the fact that a lot of money is saved when a buyer avoids paying taxes makes stamp duty tax avoidance very popular.

There are many schemes that solicitors may use to avoid paying taxes. One of these is getting a buyer to purchase a property through a company. Companies used are usually fictitious and cease to exist after conveyance is over. The company buys a given percentage of the house that cannot be taxed. The house is then sold to a buyer after which the rest of the value of the house is paid.

The other scheme that is used in tax avoidance is purchasing a property in bits. A buyer may purchase fittings and fixtures of the house separately. This he can do by taking advantage of the minimum house components of a house that can be taxed by Her Majesty's Revenue and Customs (HMRC). Buying a property this way considerably reduces the value of the property such that the amount of tax payable is significantly reduced or annulled altogether.

A buyer may also avoid paying taxes by processing documents abroad. The resulting house sale will be outside the jurisdiction of the HMRC. The HMRC is therefore blocked from levying tax.

The government is acutely aware of these and other schemes that solicitors use to avoid paying stamp duty land tax. The government has enacted various legislations to close the loopholes that solicitors use to avoid paying taxes. More legislations are coming up. The old ones are also being updated to cater for newer tricks. The loopholes are closing quickly meaning that a scheme that worked at one time may not succeed if applied at a different time.

Tax evaders are heavily punishable by the law. The government can demand payment of tax if it discovers a tax evader. The government may also charge interest of the tax and even demand a payment of 100% of the stamp duty.  

Decisive things to consider when buying a house

04/04/2017

People consider buying a home as one of the most important investments of their life. Most people will have a very detailed view of their new home. However, buying a house needs substantial investment and detailed analysis of the house and the buying process. An average person does not buy many houses in their lifetime. Therefore there are many things to consider when buying a house. Here are some things that will help you decide on things to consider when purchasing a home.

Location

Location plays a significant role in people’s lifestyle. You have to work and commuting to work up valuable time. It is a daily recurring expense and will take up an enormous sum of your income. This makes it crucial to choose a location close to the area you work. Also, other establishments like school, stores and entertainment venues are important. If you want to live in seclusion, then a rural area should be a preference.

Mortgage deals

As people may not have enough to buy their first homes, they decide on taking up a mortgage. It is vital to compare mortgage products from many banks and lenders to get the best deal. The amount you can save can help you afford a different amenity. A longer mortgage deal will have higher interest rates, and that can cause long financial drain from your income. Using mortgage calculators will help you calculate benefits with the mortgage deal you want to choose.

If the monthly mortgage rates are within your budget, it is safe to consider buying a home. Getting a huge mortgage without the means to pay for them can cause you to lose your home.

Buying Apartments vs. Homes

Apartments are usually cheaper and offer much more benefits than a home. Apartment complexes are maintained commercially, and you do not have to worry about many tasks, appliances and maintenance. If you run into any problems with the appliances, water supply, heating or any other inconvenience, you can call the landlord and get it fixed. They will likely have a repairman on call to get it sorted quickly. With a home, you will have to call the repair man and wait till they reach you. You also save on insurance taxes, and you do not require to pay property taxes on an apartment. If you move a lot, apartments are a better option.

Total cost of buying

When buying a home, you need to pay slightly more than the actual value of the home. Conveyancing process should be completed to sign you as a legal owner. Conveyancing needs to be very strict for a home. You and your solicitor will need to sniff out many problems that may hinder you in the future. This requires surveys to be conducted based on your solicitor’s advice. The process can take long and cause you stress. Disbursements like stamp duty tax, land registry tax, and other taxes are requirements when buying a house. So you will have to save up extra than just the value of the house.

Ownership freedom

It is the most important aspect of what you can do with your house. You can build or add any feature you want without dealing with the landlord. You can enjoy privacy and security of your home. After you completely pay off your mortgage, you will have no need to pay monthly fees.

Other considerations

You have to consider exceptions that might occur when buying a house. You could lose your job and fail to pay the mortgage rates. Once you have bought the house, you will have to fix every defect it has. Sometimes people failed to identify problems when buying a house and may have to spend an enormous amount on getting it fixed. 

Are there any Shared ownership risks

24/03/2017

Shared ownership enables low-income earners to get homes at reduces prices. All they have to do is pay between 25% to 75% of the price of the house. The rest of the cost of the house is catered for by a financial institution. The buyer must then pay a rent to the financial institution with which he enters a shared ownership scheme with.  The percentage of the shares held by buyers are normally paid for by a mortgage and lender. This money does not come from the buyers own pockets. They buyer may increase his shares of the property by staircasing. Staircasing involves the gradual purchase of the shares that are owned by a financial institution until the time that a buyer owns 100% of the property. He may then seize to pay rent to the financial institution. All these facts about shared ownership make the scheme seem very appealing. However, there are shared ownership risks that a buyer must be prepared for before entering into the scheme.

The Staircasing process

Staircasing your way into full home ownership is not easy. A buyer has to pay some money for every share he buys. Shared ownership is for low-income earners and is mostly funded by mortgages. This implies that a buyer of a shared ownership property may not have enough money to buy the shares of a housing association. This is because this buyer has the financial obligations to the house which include payment of rent and mortgages. He may be so financial constrained that he will never be able to buy all the shares of the property. Cases have been documented of buyers staying in shared ownership for the rest of their lives rather than taking advantage of staircasing. Staircasing can only be possible if the buyer gets an increase in his incomes.

Failure to pay regular rent for unowned portion of the house

Shared ownerships are very much like rented properties. A buyer must pay rent to the housing association or financial institution with which he enters into tenancy with. The rent is usually 3% of the shares held by a housing association. A buyer must also make a monthly instalment of mortgages If he bought the house through a mortgage. These expenditures are made on a regular basis. A buyer who fails to make rent payments may lose his property in the long run. Mortgage lenders chip-in to rescue buyers with mortgage arrears. Even so, the buyer must repay the lender the amount of money that was used to foot his rent arrears.

Maintenance costs

Maintenance costs of shared ownerships are divided between a buyer and his financial institution. This is one of the ways that shared ownerships is similar to assured tenancy schemes. The proportion of the cost of maintenance can rise steeply if major repairs are to be undertaken. Buyers who have flats owned by freeholders rather than housing associations are even at a greater risk of paying more for maintenance. This is because they are viewed as tenants by their freeholders and are not seen as shared ownership partners. 

One must consider these shared ownership risks by any buyer that is considering entering into the scheme. Although they are not high risk, they inevitably can cause you unwanted trouble during your stay. Reviewing these risks help you make a better decision for getting the most benefit out of shared ownership houses.

Examples of hidden cost of buying a house

08/03/2017

Buying a house can be very expensive. The most obvious cost of buying a house is the actual price of the property. Most buyers get into conveyance with only this cost in mind. They fail to realize that there is one or more other hidden cost of buying a house. The result is that the buyer is confronted with bills he did not expect. The worst thing is that these additional expenses have to be paid from the buyers own pockets and not with loans or mortgages. It is important for any buyer to get into conveyance with sufficient knowledge of the expenses he will have to cater for.

Solicitors Fees

The very first cost of conveyance that you will be confronted with is the solicitor’s fees. Solicitors’ fees are payment made for the services of solicitors. Solicitors are experts in real estate transaction. They help buyers and sellers in exchanging properties. Property transaction cannot sail through smoothly without the input of solicitors. They help buyers and sellers draw contracts, perform property investigations and file relevant documents. They usually charge about 800.

Disbursement Fees

Search and Surveys Fees

The other cost of conveyance is the cost of property survey and valuation. Property survey help elucidate the cost of a property. The survey takes into consideration size, location and age of the property. A buyer cannot get a mortgage without having a valid property survey report. There are many types of survey reports. Each of these serve a different purpose and cost different amount of money. The most important one is the Standard Property Survey. It gives a brief account of the condition of the property and the possible market value of the property. The law requires that a buyer conducts at least the Standard Property Survey.

Land Registry Fees

As a new owner of the property, you need to change the legal ownership of the property at the Land Registry. Only after completing the process you will own the title dee of the property. You will need to fill up forms and pay the required land registry fees to make the transfer of deeds complete.

Stamp Duty Tax

Stamp duty land tax is the other hidden cost of conveyance. Stamp duty is like an income tax. Strangely, it is charged on the buyer rather than the seller who is indeed the recipient of the price of the house. Stamp duty is charged on any newly built residential home that is worth more than £125,000 or any other property that is at least £40,000. That is, if you are buying your first home, you will be charged a tax when your home is at least £125,000. If the home you are buying is the second or subsequent home, or when it is a buy to let property, taxation begins at house prices of £40,000. Stamp duty taxes, like income taxes, are grouped into various bands with each band having a different rate. The higher the price of your house, the more stamp duty you will have to pay.

Other Fees

You should also expect to pay mortgage arrangement fees. These are the cost of processing a mortgage. Mortgage arrangement fees vary from one lender to the other. Some of these lenders have refundable arrangement fees while others do not. The arrangement fees include mortgage application fees, mortgage broker fees and mortgage transfer fees. Other conveyance fees include estate agent fees and life insurance processing fees.

Some of the questions to ask conveyancer

09/02/2017

Conveyance is a highly complicated business. It takes the work of a highly trained solicitor to navigate through this business. On the surface, conveyance may seem to be a simple exchange of properties. When you delve deeper, you will realize that there is much more to it. A conveyance must know what type of property ownership you want. He must know everything about the property from how it was built to any obligation of the owner of that property. These are very important pieces of information. They will determine if you will live comfortably or whether you will be bothered by financial and legal woes. These are questions to ask conveyancer before paying for a property

Type of property ownership

There are many different ways of owning a property in London. Many new home owners still do not know the types of property ownership that are out there. Your type of ownership agreement will affect you throughout the period of your stay in the property. In most cases, you will be able to know the type of ownership of a property in the advertisements. The advert will mention only the type of ownership without going to many details. This information can only be sufficient to someone who already knows a lot about that type of ownership. Unfortunately, many buyers do not know much about property ownerships. This is where a solicitor comes in. The solicitor will explain in details what type of property ownership you are thinking of getting into.

Buying Options

You will also need to know how to get money for buying the property. There are many ways of financing property purchase. Each of these has its own eligibility criteria, advantages and disadvantages. There are those methods of property finance that are unavailable to specific kinds of people. People with poor credit rating cannot qualify for mortgages that are issued by private lenders. However they can get help with construction loans from the state. This money is enough to build a house for qualifying individuals. Other means of financing homes that target specific buyers include Help to Buy:ISA, shared property ownership and joint ownerships. A conveyancer will tell you the means of financing a home that you qualify for and that is best for you.

Conveyancing solicitor fees and disbursements

Other than the cost of the property, there are many other things that you need to pay for. These extra expenses are referred to as disbursement costs. The amount of disbursement costs you will pay during conveyancing depends on the nature of conveyancing. The more complicated conveyancing is, the more you may have to pay. You should also think about solicitors fees. A solicitor will evaluate the impending conveyance and estimate what his fees will be. He will then send you a quote of what you should pay him. This happens right at the beginning of conveyancing. He may ask for a fixed fee or variable fee. You can talk to him about the method of payment that will work for you.

There is a lot of information about a property that a buyer will not know before he actually buys the property. These information is so important that it must be dug out beforehand. Solicitors will conduct research and tell you everything you need to know before buying the property. They will tell you about water supply and drainage to the property, mining activities around the property and any new developments that are expected around the environs of that property.

Types of disbursement when selling house

12/12/2016

Buyers and sellers encounter various kinds of disbursement fees during conveyance. The disbursement when selling house does not include solicitors’ fees. They are totally separate from solicitors fees and are individually much less than solicitor fees, but can cumulatively be more expensive than the solicitor fees. The disbursement fees are for other institutions or individuals who help the conveyance progress. The buyer or seller pays the fees indirectly through their respective solicitors. The number and amount of disbursement fees depend on the property on sale and the amount of documents required to complete conveyance. Solicitors usually include the expected disbursement fees in the initial client care letter that they send to a buyer or seller.

Official Disbursement Fees

The first beneficiary of disbursement fees is the Land Registry. Almost all property transactions involve paying some fees to the Land Registry. The fees are paid for title deeds, and title plans are made available by the Land Registry. Both the buyer and the seller need these documents and therefore have to pay the fees. The seller needs these documents to prove his claims as the authentic owner of the property and the buyer needs the documents to prove that indeed the seller is the owner of the property. It is the solicitor’s job to get the documents.

Registered titles attract additional fees apart from the fees for title deeds and title plans. This is because registered titles are protected by additional provisions that are spelt out in a separate document. The document, just like the registered title, is kept at the Land Registry. Registered titles are especially common with properties that are built by developers as part of larger estates. The cost of the title register and title plans is £14 while that of the document is £11. Solicitors used to physically present themselves to the Land Registry’s office to get the document. Currently, the document can be downloaded from the website of the Land Registry. A downloaded document is cheaper. Some solicitors pay the cost of the provisional document from their own pockets rather than bill it separately.

Taxes are another disbursement fee that is necessary expense before the purchase can go through. Many of these taxes like Stamp duty depend on the cost of the property. A buyers solicitor will also analyse if the seller has taxes or expenses due on the property.

Other Disbursement Fees

A seller can also look into Telegraphic Transfer fee. The solicitor charges these fees for the expenses incurred when transferring funds to the seller’s financial institutions. The institution charges solicitors the transfer fees and the solicitor consequently charges his client the same as disbursement fees. Telegraphic Transfer fee comes about when large sums of money are paid to cover for mortgages or when proceeds of property sales are transferred directly to a seller’s bank account through the Clearing House Automated Payment System (CHAPS). CHAPS transfers money to a bank account in one day. BACS transfer is slower compared to CHAPS.

Some solicitors may take advantage of their clients and charge disbursement fees that are higher than the Telegraphic Transfer fees. They can do this since clients never really know the cost of the transfer. The transaction is between the solicitor and the bank. Solicitors who overstate the Telegraphic Transfer fees breach the first rule of the Code of Conduct. The solicitors may also breach the second rule of the Code of Conduct when they fail to declare the amount over the cost of the fee as profit. Dishonesty in handling telegraphic transfer fees is punishable by law. The seller can report such misconduct to the Solicitor Disciplinary Tribunal.

Yes and No of residential conveyancing

10/06/2016

Conveyancing is the legal procedure of transferring possession of properties. It is well known that transferring properties can be frantic, and to save yourself from botheration know what to do and not to do while doing residential conveyancing and make your life easy.

You can do:

  1. Carry out searches against the property:
    These searches can also be made online which accelerates the procedure-Local authority search:
    This search will reveal if there are any issued notices by the local authority or any approval applications made by the recent owner, whether there are any complaints about the roads made by the local authority or any road schemes involved that would affect the property.
  2. Drainage search:
    This would reveal all the important information about the sewerage system within the boundary of the house and whether there are any mining shafts near the property.
  3. Environmental search:
    This provides information regarding the locale that surrounds the property such as whether there have been any incidents of environmental pollution or damage in the area caused by the local firms or industries.
  4. Investigation of title and other enquiries:
    In the initial stages of residential conveyancing, the buyer’s solicitor will meticulously go through the draft contract prepared by the seller’s solicitor. In order to make sure the property belongs to the seller, he/she will ask for title deeds (Land registry title) and other related documents which show the details of rights granted for the property and whether there are any mortgages on the property.
  5. Exchange of contracts:
    In the occasion of exchange of contracts, the buyer usually has to pay a deposit (5% to 10% of the purchase price) on this occasion.
  6. Stamp duty:
    Check whether there is a tax levied on documents involved and pay it off within the thirty days of completion or the full payment of the property.
  7. Land registry:
    The buyer has to put through an application to the Land registry to register himself as the new owner of the property. This application should be made within two months of the purchase.

You shouldn’t do:

  1. Ignoring bleak clauses:
    You cannot ignore any clause written on the deed so that you don’t fall under any false circumstances.
  2. Don’t delay:
    Don’t leave anything for the eleventh hour, whether it is the payment of the mortgage loan or simply putting through a submission to the land registry.
  3. Believing the myths regarding solicitors:
    There is a myth that you must hire a local conveyancing solicitor recommended by the state agent. But because of this, often you have to pay too much money for a second rate service since the state agent is generally concerned about the commission he will be receiving from the local authorities rather than providing you with an excellent service. The state laws these days have fixed fee rates for conveyancing solicitors which are there to save your hard earned from being wasted.