Stamp Duty

[Phil Norman]

Hello everyone

This may not be quite what this ng is about, but if anyone can help - or refer me to a ng that could - I would be very grateful.

Before anyone tells me that a solicitor would sort this out for me, I know that, but I would some like some idea about the process before I get to the stage of employing solicitors, etc.

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.

When she went to have a chat with a building society, about getting a mortgage, they said that there could be a Stamp Duty charge because of the value of the house - although Stamp Duty doesn't normally become payable until a property sells for more than £60,000 (or that used to be the figure - it may have changed).

Anyone got any ideas? Also we wouldn't want to go to the bother, and expense, of having searches and similar things done when we transfer ownership (we only bought the place three years ago). What are the rules about this?

If anyone can help I would be most grateful.

Many thanks

Phil

[David Hearn]

I'm not sure how things work when you're selling property for less than the market value. Certainly, your solicitor will have to sign something to state that the amount sold for is not actually part of a larger transaction (ie. £20 for the house and a £200k backhander). Actually selling for £35k may be fine - though I'm not sure how this would work with inheritance tax? (Why not just sell the house for £1 and not have to pay the tax?).

Something which does appear to apply in your situation is that apparently, you can just give the house to your daughter (tax free) as long as it becomes their main residence. I'm sure someone else can clarify further - but it may be possible that you don't have to pay anything (and she doesn't have to buy it off you - rather you can just get her to give you £35k separately). Note that purchase prices get put on the Land Registry now - so if you sold it for £35k, then the next purchaser may question it.

One final thing - I don't believe there is any requirement for searches etc to be done if you don't want it to be. In your situation you are just handing over the house to your daughter - and she probably doesn't want searches/surveys etc being done.

From what I can see - you may just have to pay the Land Registry transfer fee of between £100 and £300 or so to update the records. Assuming you're allowed to sell for just £35k - then no Stamp Duty should be due either.

D

[RichardS]

Don't think it's a solicitor that you want, but rather a good tax accountant.

There's tonnes of stuff to consider, with implications left right and centre for all concerned, and if anyone will be good at helping you to exercise your right to minimise your tax burden (aka avoidance, but this is being branded "nasty, underhand" by govt spinners) then an accountant will be.

cheers Richard

-- Richard Sampson

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

[NC]

try uk.finance - there are some very helpful people in there !

[Ben Blaney]

I would echo what David said: Can't you give the house to your daughter, and get her to give you 35K?

[IMM]

Why not? You can sell anything you like for what price you like. A future buyer knowing a house was sold for £1 would have searches on the house anyway, so no problem in the future.

[Christian McArdle]

There are all sorts of laws about selling property below market rates. Inheritance tax implications, for example, and state payment of care fees where they believe assets have been disposed of to validate a claim. It would also be easy to find ways of avoiding tax by using suspicious disposals of property.

If you sold a house to someone for £1 and they gave you a gift of £200,000 the next month, you'd probably end up in prison, so it isn't possible to just give stuff away, especially if there is some implied contract.

On the inheritance tax side, if the daughter pays £35,000 for a house worth £200,000 and her parent/s dies within 7 years, she may have to pay some inheritance tax on the difference.

Paying £35,000 WILL attract the attention of the taxation authorities, so it probably does require the services of an accountant to smooth the passage. It may be better to notify the authorities of the deal, letting them know it is basically a gift from parent to daughter. I have no idea if stamp duty is on the sale price or the value of the property, if this is much lower than the sale price. I'm sure an accountant or solicitor can advise.

Christian.

[Simon Gardner]

Not quite with houses.

That is if you sold the house for less than the market value without paying the stamp duty *for the real market value* you would be evading tax. The details of all sales go to the District Valuer who alerts the Revenue to anything suspicious. He is paid to know the market value of property on his patch. Nobody particularly minds if you 'sell the house for what price you like' but the Revenue mind very much you thereby evading stamp duty.

[David W.E. Roberts]

I recommend talking to your local Citizens Advice Bureau. Some of them do free 1/2 hour solicitors initial interview from volunteer solicitors. This should be long enough to establish if you are on dodgy ground.

Selling things at significantly less than their market value is not always the clever wheeze it seems. AFAIK it is generally treated as a sale at the current market value and a gift of the money.

I suspect you may be liable for stamp duty at the current market value of your house if you sell for an obviously trivial sum. This would probably be viewed as deliberate tax evasion.

An outright gift may be free of tax (check), but would certainly figure in any inheritance tax calculation if you (or your partner if the house is in joint names) don't last the 7 years.

If something sounds like a really great way of avoiding paying tax (and you aren't a millionaire industrialist) then the chances are someone else has thought of it before and blocked the loophole. :-(

Cheers Dave R

[Anna Kettle]

One thing you should avoid is passing the existing mortgage over to her. If she needs a mortgage then she should get a new one. Not for any legal reasons, but because I have just been jumping through that particular hoop and regretted it. The building society (Halifax) couldn't cope with such an unusual situation and took four months to do the paperwork. As it happened, that didn't matter for me, but I wouldn't go down that road again.

Anna

-- ~~ Anna Kettle, Suffolk, England |""""| ~ Pargeting, decorative and traditional / ^^ \// lime plasterwork |______|

07976 649862

[IMM]

Why? It is my house so I sell it at what I like. If someone wants to give me £200,000 then that is our business. That is not an offence. The IR may stick taxes on you, which is another matter.

[Ben Blaney]

For what crime?

Contract law is different to criminal law.

The threshold for inheritance tax is 254,000 this year, isn't it?

What is this? National Hard-of-Thinking Day? Firstly, your scenario above doesn't match the OP. Secondly, stamp duty is payable on the sale price, obviously. Think of when you last bought a house - I bet you didn't pay the asking price. You make an offer, it's accepted; that's the price.

[Peter Crosland]

But trying to evade the stamp duty is an offence.

[Peter Crosland]

There are all sorts of pitfalls and the stamp duty will have to be paid on the open market value. In order to minimise the costs and make the best use of the tax exemptions that are available you must use a solicitor. His fees will far outweigh the savings you might imagine you could make by DIY ing it. Should not cost more than a few hundred pounds. They can also deal with the conveyance that will be needed at the same time. The new building society will probably insist on the searches being done anyway. You will be VERY ill advised if you act on such a transaction without professional help. IANAL but have been involved in a similar transaction.

[Jim Ley]

We did this exactly this about a year ago, the solicitor and IR were quite happy that no stamp duty was due as the transaction was 35k. The seller had to sign something saying he wasn't going to be declared bankrupt, and there would be Inheritence tax implications subject to death in the next 7 years and large estates, otherwise no problem.

Jim.

[Peter Crosland]

Correction! Not on open market value.

[Andy Hall]

I completely agree, and also find one who knows all of the implications regarding gift transfers and inheritance tax. While the fair market value of the property may not hit the inheritance tax threshold, the complete estate might. There are a whole bunch of rules in relation to that in terms of timing just as there are for gifts.

A lot of the information is buried, often quite obscurely in tax legislation since only the major issues tend to be widely published. This also means that the typical enquiries person in the tax office doesn't have a clue.

I'm currently involved (or rather my wife is) in being an executor where these issues arise. There is no doubt that the very good accountant that we have is the main player in this and the solicitor is virtually along for the ride.

.andy

To email, substitute .nospam with .gl

[IMM]

How much is stamp duty?

[Andrew McKay]

If you want to take on the Inland Revenue that's fine. But Gordon Brown expects his tax take to be maximised at all times - and if you appear to be defrauding him by doing shady deals then on your head be it.

You can sell your home for £1 if you want - but don't be surprised if the Inland Revenue supply you with a tax bill for 10's of 000's of pounds based upon what figure the property should have realised in the open market.

As others have suggested, this is tax fraud at work. Tax fraud means that you can be sent to jail and lose all your worldly possessions. It isn't simple tax avoidance where you are mitigating your affairs to minimise your tax liabilities - tax avoidance is everyones right. Tax evasion isn't.

Andrew

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[Peter Crosland]

If you used such a scheme to evade stamp duty the Inland Revenue would regard it as a linked transaction. They would impose the tax and penalty as well and could also prosecute.