Money Help Desk: Octogenarian objects to paying £840

AS MY husband died last year and I am now almost 80 years old, I decided to sell my cottage and move to a flat or sheltered accommodation. I asked a local firm of solicitors for an estimate for selling and buying and was horrified to find that a home report costs £840. Is a home report legally necessary or is it just another way of getting money from people like myself?

AP, Edinburgh

Ross MacKay, Partner, Private Client and Financial Services, HBJ Gateley Wareing, writes:

The legislation which brought in home reports in December 2008 basically requires these to be provided in each and every case where a property is being placed on the open market for sale. There are a limited number of exceptions, but these really relate to the property itself rather than the circumstances of the seller. For example, if the property is in the course of being refurbished, is a new-build or is uninhabitable, no report is needed.

Concerns were raised with the Government that the cost of a home report would be a substantial and even prohibitive expense for a number of people in a low-income bracket, but no allowance was made for this at that time. The view was expressed that most sellers would also be buyers and thus obtain a benefit at that point. Clearly, however, that will not apply to you and the legislation does make clear that you still have to produce a home report for prospective buyers.

A home report can cost anything from 350 (excluding VAT) but can go much higher, it very much depends on the value of your property. A price of 840 does seem expensive, but without seeing your quote it is difficult to comment as this price may also include marketing fees. I would ask your solicitor for a breakdown of the existing quote but also seek a second opinion from another surveyor.

Will tax rule be double dutch for home buyer in Holland?

I AM a Scot living and working in Holland and would like to buy a second home in Scotland. My primary residence would still be in Holland. What are the tax or financial implications of having a house in Scotland? I would not rent out the house so most of the time it would be unoccupied. I would not need a mortgage – it would be a cash payment.

J B

Valerie Smart, head of tax at PricewaterhouseCoopers, writes:

The key question about owning a second home in Scotland is whether it affects your tax residence status. UK tax liability rests on the twin concepts of domicile and residence and based on your letter it is assumed you are UK domiciled but not resident or ordinarily resident in the UK. Simply having a home unlet and available for your use in the UK can be a factor in determining ordinary residence in the UK but living accommodation available for use is ignored so long as you are working full time in Holland.

In order to retain your non UK resident status you must not spend more than 183 days in the UK in the tax year ending on 5th April. This is an absolute test. In addition, there is a "91 day" test for those who have lived in the UK or are regular visitors.

If, after four tax years, your average visits equal or exceed 91 days, you will be regarded as resident and ordinarily resident from the start of the fifth tax year. However, if you had a clear intention of making such visits from now on, having acquired the new house and carried out this intention you would be regarded as resident from the start (6 April) of the tax year. If regular visits do result in you becoming UK resident, the financial impact will depend on your sources of income and gains, and also on how they are taxed in Holland as relief is given to prevent double taxation in both countries.

You will be liable to pay council tax to the local authority where the house is located, but if you are a single occupier you will be eligible for a 25 per cent discount. If the local authority regards the UK house as a second home and not your main home you are eligible for a discount of between 10 per cent and 50 per cent.

You will have to pay stamp duty land tax on the purchase price of your house if it exceeds 125,000. The rate currently varies from 1 per cent on houses over 125,000 to 4 per cent if the house costs over 500,000. There is relief for first- time buyers but only if you have not previously owned a property anywhere in the world.

Finally you may want to take advice on whether you should elect for the UK house to be your main residence – this could reduce your tax bill if you were liable to UK capital gains tax when you came to sell it.