Stamp Duty & 'Consideration' on buying for under value

da_rule

You would have to pay SDLT on the mortgage if you were taking it over. But if at the time of the gift there is no mortgage, because they have paid it off (using the £500k you are giving them) then there is no reason why it should be considered in the calculation.

ABBF08291

Out of interest, does a solicitor HAVE to pay your SDLT in a transaction (that is not a 100% cash purchase)?

SDLT is due to HMRC within 30 days of completion. Can one not advise the solicitor to not include SDLT and associated admin fees on their final invoice?

It strikes me as strange. Either the solicitor and his firm are extremely stupid. Or they are trying to charge me a higher SDLT than necessary and not justifying the figure. One would assume that when they go to pay SDLT that the amount that HMRC are epxecting is less, so what happens then? Do they come back to me and say heres the difference back, or dare i say do they pocket it themselves?

very strange.

da_rule

Most firms will complete a SDLT application for their client (and potentially charge you for the priviledge). You can opt to do it yourself. If you do it yourself (I am happy to be corrected here), you may then have to do the registration with the Land Registry yourself as they need the SDLT certificate. Or you could supply the certificate to your solicitor who could complete registration.


You can also ask for proof of the funds sent etc. It would be highly unlikely that they would keep the money themselves (assuming you are using a fairly reputiable firm). At the end of the whole transaction you should receive a final statement showing any monies owed to either you or them.

davidmcn

ABBF08291 wrote: »

Out of interest, does a solicitor HAVE to pay your SDLT in a transaction (that is not a 100% cash purchase)?

SDLT is due to HMRC within 30 days of completion. Can one not advise the solicitor to not include SDLT and associated admin fees on their final invoice?

In theory, but standard instruction from mortgage lenders is that the solicitor has enough money at completion to settle the SDLT. To be honest I'm not sure why, because it doesn't hold up registration and I don't think HMRC can start chasing the lender for underpaid SDLT (unlike the old days when you had to pay stamp duty before registration).

Sasahara

Your parent can sell you the house for 500k if hey which as long as they have can pay off any out standing mortgage they have.

SDLT is only charged for the purchase price. But be sure they are no other financial agreements related to the house sale that could benefit your parents. Best to get this in writing.

It is a bit a grey area in terms of inheritance tax, because you have paid for most of the house, you got a significant bargain.
So it's more down to is the 300k difference liable for inheritance tax if they pass in the next 7 years?

https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property#gift

Thrugelmir

davidmcn wrote: »

In theory, but standard instruction from mortgage lenders is that the solicitor has enough money at completion to settle the SDLT. To be honest I'm not sure why

To protect the lenders interests. A very basic security check.

getmore4less

Sasahara wrote: »

Your parent can sell you the house for 500k if hey which as long as they have can pay off any out standing mortgage they have.

SDLT is only charged for the purchase price. But be sure they are no other financial agreements related to the house sale that could benefit your parents. Best to get this in writing.

It is a bit a grey area in terms of inheritance tax, because you have paid for most of the house, you got a significant bargain.
So it's more down to is the 300k difference liable for inheritance tax if they pass in the next 7 years?

https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property#gift

The problem is the lender won't lend on that basis.

Pixie5740

Sasahara wrote: »

Your parent can sell you the house for 500k if hey which as long as they have can pay off any out standing mortgage they have.

SDLT is only charged for the purchase price. But be sure they are no other financial agreements related to the house sale that could benefit your parents. Best to get this in writing.

It is a bit a grey area in terms of inheritance tax, because you have paid for most of the house, you got a significant bargain.
So it's more down to is the 300k difference liable for inheritance tax if they pass in the next 7 years?

https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property#gift

The 7 year rule won't apply if the parents continue to live in the property as a condition of the sale.

If the property isn't the OP's only or main home then whilst (s)he saves on SDLT (s)he could get hammered for CGT further down the line.

da_rule

Something that might be worth considering too, is the type of mortgage. If your parents are still going to live there (regardless of paying rent or not) you may need to check with the lender as you may need a buy to let mortgage. You may also need to look at the insurance as well, something along the lines of landlord insurance.

erin110

It depends on how much you buy it for and how the lender sees it. So if a lender puts the value down as £500k and that is how much you are purchasing for and lending then your stamp duty will be on the £500k. If the lender believes the value to be £800k and you are being gifted the equity and only borrowing £500k then you will be charged on stamp duty on £800k. You need to speak to the lender to clarify. Is your loan to value, 100% or 63%?