Vendor Gifted Deposits and Tax

russelljmunn

Hi,

I wonder if anyone can help me!? I thought I was near to completion on my first house purchase of £170,000 with a 3% vendor gifted deposit meaning we've been able to get a mortgage in place for the remaining £164,900.

We we're due to exchange contracts very soon and at the last minute the vendor has changed his mind saying that his accountant has advised him that he will have a tax bill of nearly £2000 on the vendor gifted deposit.

The sounds really very steep to me, and a bit fishy, and I think the vendor may have an alternative agenda but I don't know what.

Can anyone tell me if the figures here add up? Do you pay that much tax in a situation like this? There isn't really much information on Vendor Gifted Deoposits on the internet. We were told by our mortgage lender that it was a fictional amount that wouldn't complicate the deal at all but now it obviously is.

Thanks in advance!

Russell

silvercar

I don't see why the vendor would pay tax to give you money.

toonfish

he is in effect giving you £5000 as the purchase price is £170,000 - this is what will go on th eland registry etc. I presume he will then be deemed to have recieved the full amount and is liable for capital gains tax at 40% on the £5000.

If this was his main residence then the above is not relevant, only if it was an investment property

noh

Is the vendor still going ahead with the sale to you?
You already have a mortgage offer on the property?
All he needs to do is withdraw his offer of 3% deposit paid and drop the selling price to £164900. He receives the same amount as he would have without any potential tax liability. You pay the same as you were expecting.
If he is pulling out of the sale he has an alternative agenda ie he wants more money!

Nigel

toonfish

noh wrote: »

Is the vendor still going ahead with the sale to you?
You already have a mortgage offer on the property?
All he needs to do is withdraw his offer of 3% deposit paid and drop the selling price to £164900. He receives the same amount as he would have without any potential tax liability. You pay the same as you were expecting.
If he is pulling out of the sale he has an alternative agenda ie he wants more money!

Nigel

no, because the lender wil only advance 97% of the purchase price