Stamp duty, buying for £124,999

DominicJ_2

Hi all
My long running saga with my girlfriends parents is finally drawing to a close, they have agreed to sell us their house for £126,000, which was the offer they received from a we will buy your house in seven days outfit/scam, and pay us back the money they owe, without interest.

We looked into them gifting the deposit, but the only banks that would wanted much higher interest rates, so we are madly saving up the deposit.
We are working out the cost of moving and we hit SDLT, which adds another £1,260 to the cost.
Can we offer £124,999 and pay no stamp duty? Or will the taxman complain?
Would we be better offering £123k? Or even £120k?

There would of course be a reduction in the sum they would then pay us back to balance everything. Technicaly, the best option in the long run is for us to offer the £126,000 minus what they owe us, which comes to about £116,000 but there are a few bits and pieces we want to do in the house asap, so we want as high as possible, without hitting unnecessary costs.

Thanks for your help.

DominicJ_2

Never mind, found out that its fine ofering £124,999 with a google search

StuC75

How accurate is the 125k valuation,, none of the quick buy places would pay that in the end (e.g. 11th Hour drop there offer). as much as you may be doing a favour - the fact they considered a quick buy place makes me think be hard to sell the house on the open market?

Gordon_Hose

You can offer £125k and not pay stamp duty.

princeofpounds

Or will the taxman complain?

The taxman may well investigate, but they won't complain.

Are there any other considerations ('things'!) of value linked to this transaction?

chrisw

I found that the mortgage valuers are aware of the sale price and tend to value it at that unless you are overvaluing or significantly undervaluing, as the bank just wants to be sure they can recover their money if it all goes wrong. So I have effectively a professional valuation of just under £125k which I would present to the taxman if asked, although I've never been asked.

JimmyTheWig

DominicJ wrote: »

Can we offer £124,999 and pay no stamp duty? Or will the taxman complain?
Would we be better offering £123k? Or even £120k?

No, that is absolutely fine. Many, many people do it. You never see places selling for £126k, but will see lots selling at £125k.
In fact, I would bet anything that if they proceeded with the company they would not pay above £125 in the end.

The tax man may "complain" in as much as they may investigate. They may well investigate at any price below the threshold (e.g. £115k upwards).
But as long as they don't find anything wrong with the investigation then that is fine.

There would of course be a reduction in the sum they would then pay us back to balance everything.

Hold on, this is exactly the sort of thing an investigation would be looking for!
Actually what you are saying is that you will be paying £126k for the property. The fact that you will pay £125k in money and the rest in lieu of what is owed doesn't matter. it is a £126k transaction.
It would be fraudulent to try and claim it wasn't.


If you think you can get away with this (on the basis that no-one would ever know how much they owed you originally) and want to risk it then that is outside the scope of this forum.
If you want help in convincing your girlfriend's parents that no-one would buy a house for £126k and that £125k (or less) would be more realistic then let us know and I'm sure people can offer ideas.

DominicJ_2

I posted a link to it a while back, but its off rightmove now I think.
Basically, they separated, got into some financial trouble, and used my girlfriends credit cards to get out of it. They then couldnt afford to pay them off and started missing payments. A herculean effort on my part paid the cards off, on the proviso that they quickly sell their house to pay me back.
Its been on rightmove for about 18month s, they had it on at £150,000 and no interest, they dropped to £140k and have had viewings, but no offers yet, although a couple of second viewings.
They received a £126k offer from a scam company, who I agree, would have charged them various fees, then dropped the offer at the last minute. I was perhaps being a bit pushy because they werent making much effort to sell, when the agents said £150, I said put it on the market at £140k and it took 18months for them to do so, and that spurred them to try an instant sale.

They have offered it to us at £126k, and they will pay us the £10k ish back after the sale.
For £126 the house is an absolute steal, in my opinion. Houses that fit our wants more are 200k+, but it isnt everyones cup of tea I suppose
We personally arent interested at £150,000 becuase we would rather save for the £200,000 house.

PoP
Only that they return the money they, borrowed, from us, but that would lower the price. No fixtures and fittings on top for example.
My worry was that HMRC would investigate any sale that was within the tax bill of the tax threshold, so anything over £123,750 but under £125001, and argue that the price was set to avoid tax.

kingstreet

Buy it for £124k and then they pay you only £8k back out of the proceeds?

DominicJ_2

Jimmy
Just to confirm.
Your saying if we buy their house for £120,000, and they then at a later date give us £5000k, the tax man would have grounds to investigate?
So presumably we must offer for £115,000 and receive nothing back?

kingstreet

If you can document the money borrowed from you and how it should be repaid, there may not be a problem if you purchase the property from them at a price below the stamp duty threshold.

You could ask the solicitor who will handle the transaction for his opinion as he is responsible for the completion of the stamp duty return.