Being "creative" with the LISA £450K limit?

peter_333

My partner and I have been saving hard for our first home. Both of us have had HTB ISAs and then LISAs since they were first released. Between the two of us, around £6.5K of our deposit could come from the government savings bonus on these accounts. That is, as long as we're buying under £450K (which we had always assumed we would). If we buy over £450K, we obviously lose the government bonus, and we lose again with the LISA early-withdrawal penalty.

The problem is, we've found a property we love that's listed at £480K, and while I believe we can bring that down a little, I don't think there's any chance it'll come down to £450K.

My question... What potential is there to get "creative" with the purchase price? For instance, is it reasonable / legal / ethical to make an offer on the property of £450K, and separately purchase the appliances, furniture and other fittings (curtains, shutters, etc.) they are leaving behind for £25K? Is this common practice? Is it legal? And how much of a headache could it add to the purchase process?

diggingdude

Have a go and let us know how you get on

Zero_Sum

People used to do this with house just over £250k to avoid the triple stamp duty. Think the goods have actually got to be worth what you're 'paying' for them. Although think there was a clamp down on that sort of thing

franklee

Massive headache.

For stamp duty mitigation it used to be you had to itemise and give the price paid of every item, each can be checked to see if it was overvalued. Bear in mind second hand items often have little value e.g. look on eBay. It left months of uncertainty as the taxman had up to nine months to investigate. There was also the possibility of fines if chattels were overvalued leading to saving stamp duty.

No idea what the rules for LISAs are but I guess the investigation regime would be similar.

lookstraightahead

I would just offer what you can afford - if they know why they might come down. It's less than 10% - how are houses selling in the area?

davidmcn

It would be a bit daft of them to set a limit and then not enforce it.

Plus I presume you would need to persuade your solicitor to aid and abet you in your scheme.

saajan_12

It is legal to pay £25k for furniture, you could choose to pay 1mil. Just like its legal for me to gift someone the purchase price, and them to gift me a house. But you still owe the taxes and the LISA restrictions still apply as if it was a linked transaction, ie you paid £450+£25 for a house + furniture.

peter_333

Thanks all. Food for thought here.

Prices in the area have been dropping, and vendors are accepting below asking far more than they were a year or two ago. Will see how things play out in the coming week or two. I'd hate to miss out on this property (we love it!!!), but buying over £450K looses us £7500 in deposit, the impact of which is obviously not small.

peter_333

saajan_12 wrote: »

It is legal to pay £25k for furniture, you could choose to pay 1mil. Just like its legal for me to gift someone the purchase price, and them to gift me a house. But you still owe the taxes and the LISA restrictions still apply as if it was a linked transaction, ie you paid £450+£25 for a house + furniture.

From what I've been reading since yesterday, it seems that 'Stamp duty does NOT apply to removable fixtures or “chattels” like freestanding furniture, carpets or curtains.' The qualification on this is that the amount used to reduce the stamp duty calculation must reflect a realistic value for the items.

As mentioned above, I guess eBay and a nice spreadsheet might be my friend here.

macman

Unless the carpets are Axminster and the appliances are Miele, they are not going to be worth anywhere near £25K secondhand. I doubt you'd even get to £10K.

peter_333

macman wrote: »

Unless the carpets are Axminster and the appliances are Miele, they are not going to be worth anywhere near £25K secondhand. I doubt you'd even get to £10K.

I know. But I live in hope.