Stamp duty payable?

steesh43

Hi looking for assistance on the following.

We are going to be purchasing a house for £120000 which is valued at £155000. The house seller is a relative hence the good deal.

Do we have to pay stamp duty? The hmrc website is not clear and refers to both the price paid and the market value as if it's always the same thing!

Obviously we don't wish to pay this if we don't have too!!

Many thanks

GolfFoxtrot

I think the extra money i.e. the difference between the market value and the value that you're paying (£35k) would be classed as a gifted deposit. In which case you'd be liable for stamp duty.

Are you taking out a mortgage for £120k on the value of the house being £155k which is approx 78% LTV?

Dan-Dan

Who valued it ?

cattie

You will only pay stamp duty on the price paid, so relax & enjoy your good fortune.

00ec25

GolfFoxtrot wrote: »

I think the extra money i.e. the difference between the market value and the value that you're paying (£35k) would be classed as a gifted deposit. In which case you'd be liable for stamp duty.

you think wrong

SDLT is payable based on the chargeable consideration given and received - in the context of property that is an overblown way of saying the money that physically changes hands, never the value of the property

any discount / gift equity is irrelevant since that is not chargeable consideration

if however at a later date you pay your relative a further sum (ie it was not genuinely a discount/gift of equity but merely an instalment payment plan) then that will be classed as a linked transaction and SDLT will be based on the total actually paid, which may then take you over the threshold

steesh43

Hi, yes we are taking mortgage on the £120000.

The property was valued by father in laws (seller) surveyor.

This is the total price with the remainder being our deposit.

I am going to get my own solicitor tomorrow so hopefully they see it the same way, i will certainly be quoting 00ec25 if they say different.

Thanks again

davidmcn

steesh43 wrote: »

Hi, yes we are taking mortgage on the £120000.

The property was valued by father in laws (seller) surveyor.

This is the total price with the remainder being our deposit.

Just to clarify - the sum of your mortgage and the deposit is £120k?

mrginge

steesh43 wrote: »

Hi, yes we are taking mortgage on the £120000.

The property was valued by father in laws (seller) surveyor.

This is the total price with the remainder being our deposit.

I am going to get my own solicitor tomorrow so hopefully they see it the same way, i will certainly be quoting 00ec25 if they say different.

Thanks again

I think you need to clarify. How much is your mortgage and how much is the deposit.

If its 120k mortgage and 35k gifted deposit then your chargeable consideration (ie the sale price) is 155k.

If its just a case of the sale price is 120k, made up of (for example) 110k mortgage and 10k deposit from you then you are under the threshold, since as 00ec25 says the 35k 'gift' is actually just a discount which is not part of the consideration.

G_M

00ec25 wrote: »

you think wrong

SDLT is payable based on the chargeable consideration given and received - in the context of property that is an overblown way of saying the money that physically changes hands, never the value of the property

any discount / gift equity is irrelevant since that is not chargeable consideration

if however at a later date you pay your relative a further sum (ie it was not genuinely a discount/gift of equity but merely an instalment payment plan) then that will be classed as a linked transaction and SDLT will be based on the total actually paid, which may then take you over the threshold

From the horse's mouth:

http://www.hmrc.gov.uk/sdlt/calculate/value.htm

00ec25

mrginge wrote: »

If its 120k mortgage and 35k gifted deposit then your chargeable consideration (ie the sale price) is 155k..

wrong - a gifted deposit is the same as saying equity and is not chargeable consideration because by definition the deposit is in the form of a gift, ie no consideration is received in return by the donor. The sale price remains £120k as that, and only that, is the consideration which changes hands, no consideration is being given in exchange for the "deposit" (ie. equity) component

read the many HMRC guides on the subject

"The amount of the equity is not included in the calculation as SDLT is only charged on the consideration given."

"If the transfer is a gift and no consideration in money or money's worth is given then SDLT does not normally apply"

00ec25

davidmcn wrote: »

Just to clarify - the sum of your mortgage and the deposit is £120k?

no , he is planning on a £120k mortgage secured on a property "worth" £155k, meaning the balance of £35k is the gifted equity which, for the purposes of him getting a mortgage, is treated as the deposit making his overall position 77% LTV (if the lender agrees the £155k valuation of course!)

the chargeable consideration is £120k since that is the money which he will actually pay to his relative (obviously funded by taking a mortgage out on the property).

The relative will receive nothing for the balancing £35k, which is therefore a one way gift and so outside the scope of SDLT