is this right

mutley74

i have been looking at a house which i have an offer on (not accepted yet) but vendor history of the house reveals it was listed in 2009 for £240k....but vendor bought it from his relative for £155k (property price record) on Jan 2010. Can a vendor buy a house from a relative so cheaply? (it was his deceased relatibe house)

house is now up with vacant possession as vendor wants quick sale.

agrinnall

Yes of course they can, anybody can sell anything for whatever price they want (there may be a few exceptions with price controls, but houses certainly aren't one of them).

davisc02

Not too sure about that. Lets say I find a house to buy for 550k and the owner just happens to want mine valued at 300k, the transaction is being done privately with no estate agents and both have not been previously sold for a good number of years. I say to the owner reduce yours by 100k and i'll reduce mine by the same percentage bringing both our properties under the higher stamp duty thresholds. What do you reckon Mr Taxman will say...if he finds out. Looking at your example above I would imagine questions would definately be asked.

Gwhiz

davisc02 wrote: »

Not too sure about that. Lets say I find a house to buy for 550k and the owner just happens to want mine valued at 300k, the transaction is being done privately with no estate agents and both have not been previously sold for a good number of years. I say to the owner reduce yours by 100k and i'll reduce mine by the same percentage bringing both our properties under the higher stamp duty thresholds. What do you reckon Mr Taxman will say...if he finds out. Looking at your example above I would imagine questions would definately be asked.

SDLT is a different matter. You can sell your house for whatever BUT if it's artificially low then HMRC will want the tax payment at the true market value.

kingstreet

If buying undervalue from a relative;-

there are lenders which will accept the discount as deposit and

SDLT is based on the actual consideration paid, not the true value.

For CGT purposes, the true value is taken into account, if required.

phill99

Whether its right ir not is academic. Its completely historical and has absolutely no bearing on your interest/purchase.

Gwhiz

kingstreet wrote: »

If buying undervalue from a relative;-

there are lenders which will accept the discount as deposit and

SDLT is based on the actual consideration paid, not the true value.

For CGT purposes, the true value is taken into account, if required.

So what I said above is wrong?

kingstreet

In davisc's example, these are connected transactions with what appears to be an intent at tax evasion. The solicitors on the case may have an issue.

In the example I used of a relative selling at undervalue, the consideration is the amount paid and the stamp duty is based on that, not the value.

I was clarifying, not contradicting. Hence I didn't quote you.

Gwhiz

kingstreet wrote: »

In davisc's example, these are connected transactions with what appears to be an intent at tax evasion. The solicitors on the case may have an issue.

In the example I used of a relative selling at undervalue, the consideration is the amount paid and the stamp duty is based on that, not the value.

I was clarifying, not contradicting. Hence I didn't quote you.

Hi -I was just trying to work out if my understanding is wrong, and it would appear to be so.

So just to be sure, if I sell my £5m home to my mum for £250k she only pays stamp duty on the £250K?

That seems wrong to me but I'm happy to be corrected

booksurr

Gwhiz wrote: »

Hi -I was just trying to work out if my understanding is wrong, and it would appear to be so.

So just to be sure, if I sell my £5m home to my mum for £250k she only pays stamp duty on the £250K?

That seems wrong to me but I'm happy to be corrected

in a straightforward transaction like that where your mother gets a £5m property and you get £250k cash in exchange for it the "chargeable consideration" is 250k not 5m so SDLT is based on 250k

there is no link between "market value" and chargeable consideration unless other factors are at play - such as there being a linked transaction

read the rules...
http://www.hmrc.gov.uk/sdlt/
http://www.hmrc.gov.uk/sdlt/calculate/linked-transfers.htm

Gwhiz

booksurr wrote: »

in a straightforward transaction like that where your mother gets a £5m property and you get £250k cash in exchange for it the "chargeable consideration" is 250k not 5m so SDLT is based on 250k

there is no link between "market value" and chargeable consideration unless other factors are at play - such as there being a linked transaction

read the rules...
http://www.hmrc.gov.uk/sdlt/
http://www.hmrc.gov.uk/sdlt/calculate/linked-transfers.htm

Thanks for clarifying. Every day is a school day.