Stamp Duty Avoidance

MoneyBob

Hypothetically...

If I wanted to buy a property which has been valued at 250k on the nose, but the vendor won't sell for less than 265k, and I want to buy it anyway.

But the contents are for sale also and have value, perhaps 5k.

And the building needs work doing on it to the tune of perhaps another 5k, which the vendor has offered to undertake.

We're only 5k away from buying it as:

property 250k (1% stamp duty)
content 5k
work 5k

+5k

But if we go 1p over 250k for the property we suddenly owe an additional 5k to _the man_. Which stings a bit!

mrginge

What have you got for 5k f+f?

And how is this 'work' going to be financed?

MoneyBob

mrginge wrote: »

What have you got for 5k f+f?

Yes. Fixtures and fittings for 5k. For 5k we have got the fixtures and fittings. I think I'm missing the point of your question... unless you mean specifically? This is hypothetical but assume for the sake of argument that the f+f are in fact worth 5k.

And how is this 'work' going to be financed?

It would be financed with money. Again, sorry, confused by your question.

mrginge

MoneyBob wrote: »

Yes. Fixtures and fittings for 5k. For 5k we have got the fixtures and fittings. I think I'm missing the point of your question... unless you mean specifically? This is hypothetical but assume for the sake of argument that the f+f are in fact worth 5k.



It would be financed with money. Again, sorry, confused by your question.

Ok i'll try again.

1. What is on the list of items that adds up to 5k.

2. Who is paying for the work to be done? Is it the vendor? If so how does this affect your stamp duty liability? If it is you, are you then reducing the price to 260k?

MoneyBob

1. What is on the list of items that adds up to 5k.

* The content is on this list. This is hypothetical. Let's say furniture, object d'art. Things not normally expected to be included in the sale of a house.

2. Who is paying for the work to be done? Is it the vendor? If so how does this affect your stamp duty liability? If it is you, are you then reducing the price to 260k?

* This is my point. Part of the reason for my question. I would pay the vendor by separate arrangement. Thus reducing the amount due for stamp duty. Is this legal/possible?

This then leaves another 5k to 'lose' in order to avoid having to pay the higher rate.

Can I do either or both of the above 'dodges' without potential problems?

Are there any other things I can do additionally to get rid of the remaining 5k in my hypothetical situation?

tigsly

Thing is HMRC - will look at whats on teh list - and include it if they thnk you are tryping to avoid stamp duty - second hand furniture carpets - curtains- would have to be pretty stunning to equal 5K - and I doubt HMRC - would believe you...

Also if you pay 5k for the work to be carried out- then your vendor wont 'see' that moeny- and its a risk to pay for stuff - before you have completed i'd have thought?

TBH - i think you will have to 'find 15K' to make a private arrangement to pay the vendor - that can't be throught he books- if you are avoiding tax.. And then the vendor has no protection - that you will actually had over the money...

Foxy-Stoat_3

Problems will be if/when HMRC look at house purchases bang on the threshold and investigate, maybe your solicitor can help or steer you in the right or legal direction.

You have to way up the additional stamp duty cost for the house you want against the penalty for tax evasion and or mortgage fraud if the worst could happen.

I don't see the issue with the vendor dropping the price to £250,000 and you paying them £15,000 in cash under a separate arrangement, for contents and or building work, using another solicitors if necessary.

You will need to have a separate transaction for the other £15,000 anyway if the vendor is ok with it to avoid paying 3% SDLT.

Mgman

It's possible, it may not be legal. It could be seen as tax evasion if word gets to HMRC that you paid 250k for a 265k house (not unusual in itself) BUT, paid 15k for a few bits of furniture etc just bringing the price under stamp duty allowance may ring a few alarm bells and prompt a closer look.

Similar to the elderly parents give/ sell their valuable house to their son/daughter for £1 to try to avoid care home fees/inheritance tax. It was tried but closed down.

mrginge

MoneyBob wrote: »

1. What is on the list of items that adds up to 5k.

* The content is on this list. This is hypothetical. Let's say furniture, object d'art. Things not normally expected to be included in the sale of a house.

You don't get it. You can't just write down a list of tat and say it's worth 5k. The value has to be appropriate, so if your hypothetical list says - washer £1000, curtains £500 ...etc then HMRC will query it.
So the content of your list and the assigned valuations are not hypothetical, they are absolutely critical to whether this is likely to be a permissible declaration.
Attempting to defraud the revenue by artificially inflating F&F is tax evasion.

* This is my point. Part of the reason for my question. I would pay the vendor by separate arrangement. Thus reducing the amount due for stamp duty. Is this legal/possible?

So YOU are paying for the 'work' by giving the vendor a backhander.
Will you be telling your solicitor about this 'arrangement'?
Why not increase the value of the 'work' to £50 grand, then you can save even more stamp duty.
The answer to your question is that such an arrangement would be tax evasion.

MoneyBob

You don't get it. You can't just write down a list of tat

* LOL. It's not tat. I don't want to go into detail on a public forum. The content is worth 5k in my 'hypothetical' property of interest.

So YOU are paying for the 'work' by giving the vendor a backhander.

* In my hypothetical property, the vendor happens to be a builder. And there happens to be work required which really does equate to about 5k work, and I'd be happy for the vendor to undertake that work.


But I gather that's moot. There's no other suggestions coming forward for other legal ways around things. Assuming I am correct and the above is OK there's still 5k left which will unavoidably take us over the 250k 1% limit anyway. So might as well just pay it.

Hypothetically.

00ec25

MoneyBob wrote: »

There's no other suggestions coming forward for other legal ways around things.

because better minds have tried to find such ways ever since SDLT was introduced and HMRC have systematically closed down those loopholes

these boards are littered with posts about avoiding SDLT - the short answer is there are still a few companies touting that they have a "scheme" - that scheme must be notified to HMRC, your contract with the company says they company is not liable when HMRC get round to looking at it, you will have to pay the SDLT when HMRC do so, plus interest and possibly a penalty on top, oh and BTW you won't get a refund of the fees you paid to the company

F+F lists must be at market value for second hand goods, this is normally a few £100 not £1,000. If your "hypothetical" list includes valuable antiques (although they are unlikely to be genuine F&F are they?) and solid gold taps then you need an independent valuation to prove it. If you are talking big American style fridge then go look at 2nd hand values, still talking a £100 not £5,000

if you buy or pay for something else on a separate contract then when (if) HMRC find out about it they will class it as a linked transaction and so you are back to a total cost of £265k not £250. The link is obvious as you are not going to pay a builder £5k for works to a house you do not own and if done after you move in it would be incredible that the builder just so happens to be the ex vendor - common sense tells you what to do - pay the SDLT