Selling a house for more than its worth?

AnotherJoe

Idly wondering if the following is legal, a scam, a nifty loophole, tax avoidance or evasion, or what.

A house near to me, "real" value about £350k (there are many similar houses to compare with) has I believe just been sold for £425k. Its a BTL now, but is still "owned" by the couple who previously owned it and lived in it.

The only thing that makes sense to me is that they have sold it to their own company through which they will be running it as a BTL, presumably to "eat" up some of the CGT in advance. eg they could sell it in 2 years time for £425k and pay no CGT.

The only downside I can think of is that the company will need to pay higher SDLT upfront, but presumably thats compensated for by paying much less CGT down the line.

Any thoughts? Stuff like this will of course skew house price statistics as well, presumably Zoopla will have added an extra £75k to my house (not that I've looked).

gettingtheresometime

Why are you concerned?

Richey_

gettingtheresometime wrote: »

Why are you concerned?

How very and unnecessarily rude. Having a bad day? Very immature to take it out on others...

I for one would also be interested in any responses as sounds like this shouldn't be legal but would be interested to hear others view points.

AnotherJoe

Why on earth do you think "idly wondering" = "I am concerned? (I'm not at all )


(p.s. occurs to me if i was concerned it would only be for Crashy, who would be seeing a apparent massive spike in house prices in my area )

da_rule

If it is a tax avoidance scheme it doesn't seem like a particularly good one. Assuming they've done everything above board they would've had to pay £24,000 in stamp duty.

However, if they sold it in 2 years and made a £75,000 profit then the corporation tax (as the OP mentioned a company and companies pay corporation tax rather than CGT) would be £14,250 (at the current 19% rate).

It may instead be that they are looking at building a portfolio but want the liability to be with the company rather than them as individuals. Also as a company they are not effected by the changes to tax relief in relation to rented residential properties.

00ec25

if I'm reading the correctly the house being sold was up until that point the only/main residence of the sellers? In which case of course there is no CGT to pay on disposal to the company

therefore, yes the base price for the company will be higher, so its corporation tax profit smaller, but whether that means an overall reduction in tax paid rather depends on a lot of other variables.

but at the end of the day if the company has "overpaid" then the individuals will have more cash in their personal financial equation anyway. Granted however that they can of course manage their affairs so not necessarily all of that "excess" cash will be exposed to personal tax

da-rule has outlined some of the advantages of company ownership, but also consider if, as you imply, the property was until disposal their main home, by converting to company ownership, the company cannot claim private residence and letting relief (which they could have had they remained non corporate owners) when it sells so overall the "saving" using an "inflated" base cost may not be all that much.

parking_question_chap

OP,

How have you deduced what it sold for and that its now a buy to let?

lincroft1710

Yesterday I was looking on Rightmove sold prices for houses in our street, and looked at my own which was 3 times more than I actually paid for it. So the price may have been incorrectly recorded if you looked on RM or Zoopla

AnotherJoe

parking_question_chap wrote: »

OP,

How have you deduced what it sold for and that its now a buy to let?

Talking to a neighbour who saw it on a website where sold addresses are posted, and talking to the owners who i know, and their new tenants

Yes it was previously their sole residence so whatever they sold it for there would be no CGT on sale.