buying my fathers house

caron_ward

we are trying to buy my fathers house it has been valued at £240,000 he wants to sell the house to us at a lower rate of £160,000 what problems would we encounter ...please advise ... regards caron

BobProperty

Taxman will assume it sold for £240,000 and someone may be trying to avoid IHT or CGT.

CashSaver_2

BobProperty wrote:

Taxman will assume it sold for £240,000 and someone may be trying to avoid IHT or CGT.

and stamp duty

Bossyboots

At this stage, surely the only issue is the stamp duty if the father is still alive. I would anticipate that HMRC will investigate this transaction as it is close to the stamp duty margin and clearly sold for well below its market value.

As to IHT and CGT, the father may live long enough for the £80,000 "gift" (for that is what it will be deemed) to fall outside IHT considerations.

As to CGT, this will not affect the father, assuming he is selling his PPR. It will also not affect those buying the property if they then use it as their PPR.

The selling under value will also be questioned if the father subsequently needs residential care for which he would be expected to pay if he has the means. The further in the future that is, the less of a problem it becomes but it is something else to bear in mind.

RiskAdverse100

HMRC will not investigate this transaction from a Stamp Duty Land Tax point of view.

There is no law that prevents someone from selling a property at a reduced price or even for nothing at all.

SDLT is paid on the price actually paid for a property, regardless of how much it is really worth.

If you want to sell a £10m property for 10p then you can and no SDLT is payable.

In the form that is completed and sent to the Revenue you only need to state the price actually paid, not the market value.

Inheritance Tax and Capital Gains Tax issues are entirely separate.

RiskAdverse100

silvercar

Are you looking for a large mortgage?

Check the lending restrictions of the lender. Some will give you a max loan to value of the price you pay not the value eg 90% of £160k rather than £240k.
If the mortgage you are after is near the price you are paying, you may need to phrase the purchase as at a higher price with a gifted deposit. Not all lenders will accept gifted deposits so do take advice.

Tassotti

RiskAdverse100 wrote:

HMRC will not investigate this transaction from a Stamp Duty Land Tax point of view.

There is no law that prevents someone from selling a property at a reduced price or even for nothing at all.

SDLT is paid on the price actually paid for a property, regardless of how much it is really worth.

If you want to sell a £10m property for 10p then you can and no SDLT is payable.

In the form that is completed and sent to the Revenue you only need to state the price actually paid, not the market value.

Inheritance Tax and Capital Gains Tax issues are entirely separate.

RiskAdverse100

Good points made here.

When the valuer for the mortgage company assesses the property, they will generally tell the lender that the property is worth the asking price. They,usually will not say it's worth more (although does depend on surveyor)

Buy at 160K, then immediately remortgage to 240K, take the 80K and buy your father a very nice gift.

I suppose this could be seen as fraud though

Another option, I buy it from your father, then immediately resell it to you (takes out the whole family question thing)

Tass