Buying parents' house - possible to avoid stamp duty?

Edtough

My retired parents are looking to downsize. I am interested in buying their house off them (approx £500K).

Obviously we'd be able to avoid the use of an Estate Agent, but are there any other tricks I should be considering?

I'm really wondering whether there is some way to avoid Stamp Duty?

Thanks in advance.

kingstreet

Yes. They sell you the property for £125,000.

audigex

In theory there's probably nothing stopping them from reducing the price below the stamp duty threshold: and of course if you then gave your parents a gift of a new kitchen on their new property, or bought them a car, who's to say that had anything to do with the sale of the house. I've heard of people doing this when not related, and it certainly seems easier if you are, as you purchasing a car for family rather than strangers is far more justifiable.

In practice, though, this house is probably far too expensive to avoid it entirely, but stamp duty has thresholds which may save you some money...

The tricky bit is that they can obviously then only reduce it as far as they're willing to give you a gift, or to the level you have cash for: they can't sensibly reduce it beyond the amount you'd need a mortgage for.

Note that I'm not in any way a legal or financial advisor, this isn't legal advice and I've no idea whether you could get into a lot of trouble for doing it....

rexmedorum

I wonder if banks and solicitors would raise eyebrows at this.

Also remember that anyone can see previous sale prices and these days most of those are even shown on the internet. So that would raise some questions with future buyers. They may even base what hey're willing to pay on average increases in the area

Just some thoughts

audigex

They may, but one house sold like this isn't likely to change buyer behavior, particularly if you keep the property for a few years.

At the end of the day they have no idea whether you bought an absolute shell and spend £200k renovating it.

m_13

HMRC understandably take a very dim view of tax avoidance and stamp duty avoidance is no different. You run the risk of the transaction being reviewed and being forced to pay the stamp duty that should have been paid on the transaction. Stamp duty is based on the chargeable consideration so if you pay them £500,000 for the house then that's what the stamp duty is payable on. Of course if you pay them £300,000 then that's what you'd pay stamp duty on. As others have said, the remainder of the value of the house wouldn't matter. Are they offering to sell you the house for lower than the value?

Edtough

No, they'd want the going rate.

Thanks for the help.

mrginge

audigex wrote: »

In theory there's probably nothing stopping them from reducing the price below the stamp duty threshold: and of course if you then gave your parents a gift of a new kitchen on their new property, or bought them a car, who's to say that had anything to do with the sale of the house. I've heard of people doing this when not related, and it certainly seems easier if you are, as you purchasing a car for family rather than strangers is far more justifiable.

Linked transactions are included in chargeable consideration, so your suggestion falls squarely under tax evasion.

macman

You can't avoid stamp duty just by buying from a relative, if that is what you are asking.

Hoploz

The best, most legal suggestion I think would be to ask them to give you a discount equivalent to the stamp duty amount that you would pay. In other words, they would pay the stamp duty for you.

However, they may or may not want to give you this discount - they could just sell to someone else for the full price.

Basically you are just a normal person having to pay taxes, just like the rest of us. Never mind.

ikorodu

You may be better posting this is the 'Cutting Tax' forum. People there tend to have some in-depth tax knowledge.