Buying from, and selling to, the same person.

ed67812

Hi all.


So, our house is on the market for £185k. Somebody came to view it and mentioned that her house was on the market. It's on for £235k (she needs to downsize a bit). We went to look at it and, subject to us getting a new kitchen etc. it could be right for us.


Obviously there is a conversation to be had but I would envisage negotiating around the same % reduction off each house price.


How low could we drop both selling prices too before it would be considered naughty in terms of stamp duty? As obviously having low prices on paper reduces estate agent and stamp duty costs.


I realise that I will need to speak to her as it may be that she needs a price close to asking (and hence would have to pay similar for ours) in order to take sufficient equity to get a decent mortgage.


Any thoughts on this situation would be appreciated.

Grenage

I believe SDLT is worked out on property value in the current market - specifically to avoid this sort of avoidance.

davidmcn

ed67812 wrote: »

How low could we drop both selling prices too before it would be considered naughty in terms of stamp duty?

The open market value.

pinkteapot

SDLT is worked out on the purchase price, not the market value (except for certain commercial property purchases and shared ownership purchases). However, HMRC can and do investigate suspicious looking transactions (eg someone paying thousands for carpets, separate to the purchase price). A pair of people swapping houses - buying from each other - would be bound to raise a red flag in their systems and get the transaction looked at.

davidmcn

pinkteapot wrote: »

SDLT is worked out on the purchase price, not the market value (except for certain commercial property purchases and shared ownership purchases).

Not quite - it's charged on the consideration, and if part of the consideration is transferring another property then it's based on the value of that property.

Some residual confusion because in ye olden days you only had to pay stamp duty on the cash difference being paid, and some people seem to think you can still do that, but it was abolished long before even SDLT started.

xylophone

http://www.wiseandco.co.uk/stamp-duty-land-tax.html
"Exchange of land
If two persons agree to exchange their property interests, this is treated as two land transactions and stamp duty land tax is then payable by both parties. Following the Finance Act 2011, the rule is now that liability arises on each party on the greater of (a) the value of the property acquired and (b) the value of the property given in consideration together with any other amount paid. In practice this is likely to mean that both parties will have liability on the property with the higher value."

Seems relevant?