Stamp duty avoidance

antony5378

I am looking at buying a property for £300,000. This equates to a stamp duty of £7,500.

The owner of the (£300,000) property is interested in buying my property for £200,000. In essence a part-exchange where i pay an additional £100,000.

Is it possible to revalue the properties so mine would be worth £150,000 and the one i hope to purchase £249,950 (bringing it into 1% tax bracket). I would still be paying £100,000 but only £2,500 stamp duty. Is this classed as avoidance or evasion?

Tixy

That would be evasion.

G_M

Evasion. Go to gaol. Do not pass go.

These would be 'linked transactions' - see the HMRC website.

mufi

antony5378 wrote: »

I am looking at buying a property for £300,000. This equates to a stamp duty of £7,500.

Unless I'm missing something, you'd better sit down; stamp duty on £300,000 is £9,000 (3% on the entire purchase price). And it is, of course, evasion.

Annie1960

Definitely evasion, and I doubt whether your solicitor would agree to proceed on this basis.

antony5378

Apologies SD is of course 3% not 2.5%.

Linked transactions on HMRC are defined as involving the purchase of multiple properties or the splitting of a single property in to two lots where the individual buyers of each lot are 'Linked'.

If the transactions are 'linked' then every housing sale that takes place is 'linked'. i.e. You might be willing to accept a £20k reduction on the sale of your property if you'd just made a £45k saving on the property you intend to purchase. This is something that happens many times every day.

Assume i offer £249k for the £300k property, which is then accepted. Now assume (by chance) the owner of the £300k house sees mine and makes an offer at £150K, which i accept. At this stage neither of us are aware that we are in fact about to swap homes. How can this be tax evasion when it can happen purely by chance?

Annie1960

But it is not purely by chance, is it. HMRC are aware of such behaviours, and they usually look extra carefully at transactions just below the threshold, so a sale at £249k (just below the £250K threshold) will make them look more closely at it.

Solicitors also have a responsibility in this respect.

davidmcn

antony5378 wrote: »

Assume i offer £249k for the £300k property, which is then accepted. Now assume (by chance) the owner of the £300k house sees mine and makes an offer at £150K, which i accept. At this stage neither of us are aware that we are in fact about to swap homes. How can this be tax evasion when it can happen purely by chance?

Because it didn't happen purely by chance. You're giving each other a discount in exchange for the other party giving you one.

Bluebirdman_of_Alcathays

The trail of breadcrumbs won't exactly be difficult to follow when something sells just under 250k threshold, is clearly worth much more, and the buyer is then noticed repeating the trick with their own property?

You can try it, and you may even get away with it, but rest assured it's illegal!

antony5378

I'm aware of tactics where buyers pay cash for 'chattels' to reduce the value of the house below the SD threshold, which is legal but both parties also benefit. I was just curious if there was other means of tax avoidance.
I wonder if i can pay £50k for a nice patio set i saw at the house ;-).

Thanks for replies.

AndyT678

antony5378 wrote: »

Assume i offer £249k for the £300k property, which is then accepted. Now assume (by chance) the owner of the £300k house sees mine and makes an offer at £150K, which i accept. At this stage neither of us are aware that we are in fact about to swap homes. How can this be tax evasion when it can happen purely by chance?

Rest assured that you are not the first person to consider committing fraud in this way.

As with all criminal enterprises there is risk and potential reward. If you're willing to risk spending some time in chokey and never being able to get a job or credit ever again to save a few grand on tax then go ahead.

Personally, I don't think the risk is worth it.