Non refundable deposit and using the LISA

cjv

I can't find any information on what would happen if you used a LISA for a deposit, pulled out after exchange of contracts and lost the deposit.

Does anyone know the rules on this scenario?

It has not happened to me, it is just something that has crossed my mind.

masonic

It would be subject to the 25% penalty, which would in the first instance be charged to any remaining money in the ISA or any money recovered by the conveyancer.

https://www.gov.uk/guidance/lifetime-isas-for-isa-managers#failed

cjv

Thank you, I did find that information but it did not state anything specific about a deposit being lost. I guess the "falls through" covers their bases.

If this happened and zero money was returned to the LISA because the full amount was used as a deposit, individuals could essentially end up being thousands of pounds in debt to HMRC.

Alexland

If you pull out of a property purchase after exchanging contracts and deposits you have bigger liabilities to worry about than HMRC collecting their 25% penalty....

cjv

True Alex, just seems a bit harsh if it happens through no fault of your own.

Alexland

cjv wrote: »

True Alex, just seems a bit harsh if it happens through no fault of your own.

Good solicitors are extremely careful to run all the required checks before exchanging contracts and deposit money. I cannot imagine our solicitors would let a client get into that position. It would be extremely disruptive to a chain and there could be significant consequences to breaking contract.

Alex