Stamp Duty

[IMM]

If they want to tax then they tax. Prosecute? For using the free market?

[Phil Norman]

Hello again

Well I seem to have stirred up a bit of a hornets nest with my question about Stamp Duty. I am very impressed with how helpful everyone is trying to be, and have found the replies to be fascinating as well as informative.

Can I clarify one or two points in my original post which have caused some confusion and sent a few people in the wrong direction. Firstly, as things stand at present, there are no Inheritance Tax implications. If I died tomorrow, my estate would be well short of the threshold for that - and anyway in the event that I suddenly became richer, and my wife and I both died within the next seven years, I am quite prepared to make a declaration so that the full market price of the property comes back into the Inheritance Tax equation. Secondly, the purpose of the exercise outlined in my OP is not entirely as I explained - but there is no attempt on my part to evade tax. I will explain more fully.

The real reason why I wish to sell my house to my daughter in this manner is, because of a change of circumstances, I find myself in rather a difficult position - I am struggling to pay my mortgage. By modern standards I have a relatively small mortgage, but because of my age (middle 50s) it is payable over a much shorter period than usual - and, consequently, the monthly payments are correspondingly high. One solution I thought would be to sell the property to my daughter for £35,000, sufficient to clear the mortgage - much more than this figure and she would struggle herself to meet the monthly payments (with her other commitments - student loan repayment, rent on flat, etc). As I said previously, she will inherit the house one day anyway - but obviously not if we lose it ourselves. She does not own any other property, and neither do I. What I said about my wife and I moving to another house is not untrue, but we would not be able to do this for at least a year. In the meantime we would probably stay where we are - paying a small rent.

Obviously this whole project would be pointless if we have to involve ourselves in expenses of probably several thousands of pounds in Stamp Duty, surveys, searches, etc. Hence my question.

Regards

Phil

[Ben Blaney]

This is the issue being debated. And it's an interesting one. Can someone - anyone - reference a Govt source which clarifies the matter one way or another.

The OP's dilemma hinges on this: if he can sell his 200K house to his daughter for 35K without breaking the law, or not.

[Richard]

There is no doubt that the very good

Wait till you see the solicitors bill. In my experience they are very good at charging everything that moves! Richard

[L Reid]

1% under £250 IIRC

[L Reid]

Indeed if you had a good sols, and got some 'extra bits and bobs' I suspect you could have knocked the value for the house under £60K anyway and said £2501 was for the fixtures (fridge/ wmachine ect). Paying £59950 for a house advertised at £62500 is within the realms of possibility, paying £35K for a house worth 3 to 4 times that isn't. I take it the property isn't in a deprived area? Would be exempt up to £150K then.

[Andrew McKay]

No. For being involved with a tax evasion scheme.

You park your car at a parking meter, which times out 5 minutes before you get back. A meter maid slaps a ticket on your windscreen.

You come back and stick another coin in the parking meter, thus paying for the extra time. You drive off. Does that mean the parking ticket is void?

Andrew

Do you need a handyman service? Check out our web site at

[Andrew McKay]

't you guys use a search engine?

Andrew

Do you need a handyman service? Check out our web site at

[Christian McArdle]

There may be issues if you are subsequently found bankrupt, as the disposal of the property below true value may be illegal if you are doing it to shield your assets from your creditors. It is illegal to give your possessions to your family, be made bankrupt and then have it gifted back. Not that every famous person in difficulties hasn't tried it.

Given that you will be living in the house after the transaction, it may well attract attention that the deal is not what it seems. If you are likely to need long term care or income support, they might be extremely suspicious that you are artificially disposing of property to maximise your claim.

This situation is too involved to diy. You may get a more knowledgable response in uk.legal.

Christian.

[Tony Bryer]

But the question was whether stamp duty would be charged on the price actually paid or the market value. I suspect (IANAL) that as this is a transaction between 'connected parties' the latter might be the case.

[stuart noble]

Hi Norman The idea that you're doing something previously unheard of and that you'll need all kinds of accountants and solicitors is faintly ridiculous. Go to the horse's mouth and talk to the Inland Revenue. They probably have a leaflet covering your situation or it'll be the tenth time they've been asked the question that day. Why use middle men?

[Andrew]

Because it would be impossible to prove you were evading tax rather than negotiating a fair price. Selling a £220k house for £35k is pretty obvious and the OP's intentions are now documented in this newsgroup thread. Lets hope no one from the IR is reading!

Andrew

[Tony Hogarty]

Are you being deliberately as thick as f*ck or are you always like this? I've had enough of your ramblings so its time for IMM to hit the kill filter.

[IMM]

It is plain you are a fool. Put me on your killfile .

[John Rumm]

It seems to me that you would only be evading stamp duty if there were some other "backhander" involved.

In other words if the daughter pays only 35K for the property and nothing else, then this is the price end of story - hence no stamp duty to pay (there may be inheritance tax implications if the parent dies within 7 years - but that is a separate issue).

If the daughter pays 35K "officially" but then also pays more money by some other duplicitous route, taking the "effective" price over the stamp duty threshold then that would be classed as evasion.

[RichardS]

Yes, on the face of it this is true.

The OP has stated his reasons for the transaction, motivation being a desire to help out his daughter and not to evade stamp duties, inheritance taxes, put assets out of reach of creditors, etc.

In a free market transaction with unconnected parties and no linked transactions or future use of the house then there should be no problems (however, IANAL and don't know the details of the various acts that cover Stamp Duty).

However, this does not seem to be an arms-length transaction, and as such there are probably a myriad of laws governing such matters. A solicitor shoudl be able to give chapter and verse on the Stamp Duty liablility, but a good tax accountant should be able to advise on other pitfalls as well.

Transactions (especially involving land and families) are not always as straightforward as they might seem to the layman.

cheers Richard

-- Richard Sampson

email me at richard at olifant d-ot co do-t uk

[Andy Hall]

It certainly is for inheritance tax purposes. There are a whole bunch of rules with time limits and property transfer comes especially under scrutiny. It is possible to do asset transfers through the medium of a company or business and enjoy 50 or 100% tax relief, but only if the property was an asset of the business e.g. a premises from which the transferor carried on another business. It doesn't apply if the sole or main purpose of the business is property ownership and management.

The whole area of IHT and stamp duty is a minefield. Apart from IHT especially being completely iniquitous to begin with -the transferor already paid income tax - the operation of the system is a mess. Typically a bereaved person has to deal with with the incompetence of the Inland Revenue at a time when they can least do with it.

I really don't see the basis for any form of taxation on asset transfer between family members whether in life or at time of death.

It strikes me as an even bigger rip-off than National Insurance.

.andy

To email, substitute .nospam with .gl

[Andy Hall]

On Wed, 6 Aug 2003 11:48:22 +0100, "stuart noble" leaflet covering your situation or it'll be the tenth time they've been

Because most people at the IR that you will typically reach are clueless on anything much more than self-assessment. If you ask something about CGT, even relatively simple, they don't know. Inheritance tax? Forget it.

The leaflets cover only a tiny amount of the most widely used tax legislation.

If you want to get into the subtleties of CGT, IHT or even stock options you can research it yourself since most of the legislation can be found on the IR web site. However, much of it is obscurely written and non-obvious as to whether it applies in a given situation.

My accountant tells me that more often than not in these cases he has to point the officer to the legislation that applies and then get them to agree (in writing) that it is applicable to a case in point. There is plenty there for tax saving, but the layman won't find it for himself.

.andy

To email, substitute .nospam with .gl

[Nick Nelson]

I'm reluctant to muddy the water even further, but no one has mentioned Capital Gains Tax so far. Couldn't this apply too in some circumstances?

Nick

[Meoww]

snip

Without wishing to get involved in the issue of stamp duty which may or may not be payable (IANAL), and whilst suggesting that you see a solicitor on a 'first fifteen minute freebie' to find out, it maybe worth your while selling the house to your daughter for the maximum amount she can borrow and maybe consolidating her other debts.

Her repayments on the mortgage would probably be less than her accumulated outgoings at the moment and with the amount of equity available in the property this may well be the answer to your problem.

Of course this is speaking from the point of view of someone who doesn't know your daughter's financial circumstances. Often though, when you have a problem like this, it can be worthile to try and think that 'little bit bigger' than the immediate circumstances. It's been the downfall of many a person to borrow too little as opposed to too much.

If for instance she acquired a 40k mortgage and then had no other outgoings, would this help? If so,you could pay the stamp duty for her out of the proceeds of the sale.

Whatever you do, do this via a lawyer, have the searches done and get it right. The few hundred pounds you might save on a diy conveyance are just not worth it. Your daughter will need a solicitor too otherwise the B.S. won't go along with anything!

HTH

Patrick

p.s. also visit a mortgage broker. You'll be amazed at the deals on offer which might help you. Best of luck.