Stamp Duty

[Owain]

"Phil Norman" wrote | Essentially I want to sell my house to my daughter for a nominal price | - £35,000 instead of the £150,000 that it's worth. We have various | reasons for wanting to do this. Mainly I just want to give her the | property (it will be hers anyway some time in the future), but I | need to pay off the existing mortgage - that's were the £35,000 | comes in. Then my wife and I plan to move into another property | that we have some involvement with, but don't own.

One point to consideder is that in the vague and distant future your daughter's liability for capital gains tax may be based on the difference between what she pays now and its future value. It might be better for your daughter to pay you a more realistic value for the house now (perhaps just below stamp duty threshold) to lessen her tax burden later. You could then give her a gift in cash, which I think will be inheritance tax free if made

I agree with RichardS that it's a tax accountant you need. You should consider the overall liability for tax across both your and her circumstances.

Owain

[Peter Crosland]

If, as I assume, it is the OPs principal residence then it is exempt. of course it is something to factor into the equation under some circumstances.

[Richard Savage]

Property can be transfered subject to charge.

Richard

[Richard Savage]

Threshold for stamp duty is, currently, £60,000. Actual % at £60,001 escapes me but is payable on the whole sum, not the difference

Richard

[Richard Savage]

Phil,

What's your email address? I get an error when I try to send you a message regarding the above.

Rgds Richard

[Andy Hall]

AFAIK, CGT does not come into play if the property is the primary residence.

.andy

To email, substitute .nospam with .gl

[Neil Jones]

How about she buys 35/150ths of the place for now?

[stuart noble]

Not my experience at all. Of course you need to speak to the organ grinder rather than the monkey, but that applies to most oganisations.

Well, he would say that wouldn't he? An accountant doing my books once told me that he was the only reason I wasn't in prison. That remark and the notion that his fee should be a percentage of my turnover led me to sack him and deal with the IR direct. As I say, I found them very helpful. As a friend once said, "If you go to them, they take their hat off to you. If they come to you, they take your trousers off".

[Phil Norman]

Might be complicated legally, but it sounds like a possibility. Having to have a building society involved could prove awkward though.

[Anthony R. Gold]

So there will be no stamp duty to pay so long as the nominal sale price is kept to below £60,000.

Stamp duty is usually paid on just the actual transfer price whether that is fair market or not, but in the case of a gift of property with a mortgage, stamp duty is charged on an amount equal to half the mortgage, and if the mortgage is less than £60,000 there will still be no duty.

See:

the ther hand, there will be a gift equal to the market value of the property minus whatever nominal price you receive, so there could still be IHT (estate tax) payable where the value of that gift element will be added back into your estate if you were to die within 7 years of the transfer. Of course, the way to beat that is to look after yourself :-)

Tony

the If you give the house

[Anthony R. Gold]

There will be no stamp duty to pay so long as the nominal sale price is kept to below £60,000.

Stamp duty is usually paid on just the actual transfer price whether that is fair market or not, but in the case of a gift of property with a mortgage, stamp duty is charged on an amount equal to half the mortgage, and if the mortgage is less than £60,000 there will still be no duty.

See:

the ther hand, there will be a gift equal to the market value of the property minus whatever nominal price you receive, so there could still be IHT (estate tax) payable where the value of that gift element will be added back into your estate if you were to die within 7 years of the transfer. Of course, the way to beat that is to look after yourself :-)

Tony

[parish]

I would agree with that. I've recently been filling in Inland Revenue forms while winding up my late father's affairs and one thing it explicitly asked was whether his house had been sold at an artificially low price (can't recall whether there was a time limit on that, but it might have been 7 years). I guess that is to catch people trying to avoid Inheritance Tax.

Another gotcha with selling property is if you should be unfortunate enough to end up in a Nursing Home or such and have to claim State Benefits to cover/help with the cost. If you have given your home to your child(ren) within the preceding 7 years (or sold it to them for a token price) then the Social Services still consider it yours[1] and consider that you have assets equal to it's realistic market price, i.e. you won't get any benefits even if you are otherwise penniless. Again, I speak from experience of dealing with my father's affairs when he ended up in a Nursing Home following a stroke.

[1] There was a court case a couple of years ago about this where the plaintiff claimed that the house was given (about 4 years previously) to the children *before* (s)he became ill and therefore the Soc. Sec. couldn't treat it as an asset. The court ruled in favour of the plaintiff.

Expert advice is definitely recommended.

[Andy Hall]

On Thu, 7 Aug 2003 08:24:12 +0100, "stuart noble"

It depends on the complexity of your affairs and your business. If you are employed or self employed or have a one person business, it may be true that you can deal with the IR directly since there are a lot of people in that boat.

If your circumstances are more complex in terms of investments, ownership, directorships etc. then quite a lot of the applicable legislation is buried quite deeply and the typical IR people do not know about it. I could certainly research the legislation for myself and have the discussions with the IR, but it is much less expensive to get my accountant to do it for me.

.andy

To email, substitute .nospam with .gl

[Anthony R. Gold]

Your suspicion is incorrect.

Tony

[Andrew McKay]

Correct. And that's because the PCG insurances (including Route35 which I have) are nullified if you approach the Inland Revenue first.

I don't exactly know where you are getting your facts from. I attended a PCG meeting last night where the head honcho of Accountax gave us an informal presentation. The advice I heard was that the Inland Revenue practice a war of attrition - enquiries extend into years and so on. The Revenue virtually always take the view that you are caught by IR35 as the starting gambit.

However those IT contractors who have the balls to stand their ground invariably come out on top. Well over 100 cases have been taken to the commissioners - 1 was lost, all the rest won in favour of the contractor. And the one that was lost was felt to be a poor case anyway.

I'd go further - expect the Revenue to say "caught" every time.

The leaning is going on in Dawn Primarolos direction specifically. She is the minister who has responsibility for the Revenue.

Andrew

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

[RichardS]

'cos if you ask and don't like the answer then it's more difficult to get things reversed - organisations don't like to be seen to change their minds... the Revenue is no different. Insurance underwriters don't like to worsen their odds.

Then we're in complete agreement - I was referring possibly to the same article from one of the organisations, showing a tally of cases won/lost by the various review services and accountants. The Stutchbury case was the one that I knew had failed, but I did think that there were one or two others, couldn't find the exact numbers when I needed them. I did know that the vast majority found against the Revenue's position.. The recent decision reversal to "outside" in another case is a bit of a welcome development in this mess of uncertainty.

Yup. Which is why I wouldn't recommend the OP approaches the Revenue hoping, in innocence, for a fair, unbiased opinion. He'd get factually correct answers for clear cut things, but if there was an obvious way to avoid this tax then the likelyhood that he would be told about it is not high.

Grrr, Dim Prawn. A shining example of all that is wrong with incompetent career politicians.

-- Richard Sampson

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

[Andy Hall]

So you see insurance actuaries as bookies as well....?

Somebody once told me that an actuary is somebody who found accountancy too exciting

.andy

To email, substitute .nospam with .gl

[Andrew McKay]

I don't think I'm breaking any confidences to say that the opinion of the folks who know about these things was that Stutchbury made one fatal mistake.

That fatal mistake was that he chose to represent himself rather than enlist professional advisors to fight his corner. And when it came to the time of representing the case to the commissioners, when the professionals did get drawn in, the damage had already been done.

That said, it is widely rumoured that Stutchbury, being an ex-policeman and used to standing up in a court of law to give evidence, presented himself well so this shouldn't reflect badly on his presentation abilities. I'm not up to speed on the specifics but I think he may have failed in the area of being able to draw case law in to support his case, giving the Inland Revenue professionals an open goal to shoot at.

Which is why I've paid the money to put suitable insurances in place. If the Revenue ever point their guns in my direction I'm absolutely certain that I want a decent set of cannons pointing back.

Andrew

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

[Tony Bryer]

The chances of this happening are nil, whatever the government. Stamp duty has several advantages to governments: inflation and fiscal drag mean that it brings in more each year without them doing anything and as nearly all property transactions have to go through the Land Registry it is all but unavoidable for ordinary mortals. Also the rates here are a lot less than in some countries - 6% in Victoria, Australia. We also pay estate agents a lot less than in some countries - IIRC something like 5% is the norm in the USA

[David Hearn]

Remember though - in many countries (USA and Austrialia certainly) the house prices are much lower, and a smaller proportion of income, so 5% may well sound high - but 5% of a £100k 4 bedroom house is the same as the 2% of a £250k 3 bedroom house around here (Guildford). If you don't go sole-agency then the 4% on £250k is just stupid! (£10k).

As for stamp duty - 6% on £100k (£6k tax) and 3% on £250 (£7.5k tax) isn't too far different. Though when you're in the 1% bracket (