For Sale By Tender fees "may be taxed"

Buyers who pay so-called finders' fees to estate agents using the controversial For Sale By Tender sales tactic may end up paying tax on their outlaw, according to a senior figure from the Law Society.

Most agents using For Sale By Tender charge the sellers a small fee - often just £150 - but the buyers face a more substantial charge, often up to two per cent of the agreed sale price of the property.

Some estate agents and MPs have questioned the morality and sense of the idea but now Jonathan Smithers, deputy vice president of the Law Society of England and Wales, says HM Revenue and Customs may treat the payment as part of the purchase price and consequently it might be liable to stamp duty.

Smithers, who is also chair of the Law Society's Conveyancing and Land Law Committee, has told Mortgage Introducer magazine that the purchase price and the fee may form a so-called connected transaction. The buyer is paying the finder's fee and the purchase price. If you were doing this as a method of avoiding Stamp Duty then I don't think that would be effective under the rules he says.

Some agents operating For Sale By Tender ensure they levy the charges separately, to avoid such an interpretation, but it is not known if all agents are this precise.

The whole For Sale By Tender method of selling is to be subject to a review by The Property Ombudsman over the summer.