Sale below valuation - legal/tax implications

CarlosB

Good afternoon. My first post in this forum, a quick question on valuations vs price:

In a private market sale of a residential property I own in England, am I allowed to agree with a third party buyer (i.e. no family member etc.) a price below valuation or are there legal limitations as to the price that can be agreed, for instance compared to the valuation?

As an example, if the flat is valued at 100k but I agree with a buyer to transact at 70k, would that raise any legal issues?

From a tax perspective, I believe CGT would be calculated based on the valuation (and it is up to me to conduct a valuation and provide it to HMRC), and SDLT based on the agreed price – is this about right?

Any help is welcome.

Thanks!

AdrianC

If it's an open-market transaction with an unrelated third party, then the sale price is the de facto value.

It's only when the parties are connected - say, a family sale - that the difference will be considered as a gift.

After all, you wouldn't "give" £30k to a stranger, would you? (but if the answer is "yes", can I PM you my account details?)

I'm presuming there won't be any underhand shenanigans, like the buyer gifting you £30k in a totally-unrelated-honest transaction in the near future...

theartfullodger

HMRC have the power to tax matters on what they deem full market value.

One could imagine several circumstances where persons wish to conduct matters this way to avoid taxation.  Not you , obsv...

MoJoeGo

Many many years ago, an acquaintance of mine sold their house to a neighbour, who ran a business that was pretty much cash based. They sold it 'officially' for quite a bit less than what the estate agents had valued it at, however there was also a pretty substantial cash 'gratuity' thrown in on the side.

Luckily it was a bit of a niche property and never formally marketed, so not one that would have been easy to prove a fair market value for, but all sorts of dodgy in any case - actually it was less about the reduced stamp duty than the fact that it was clearly untaxed cash income from his business.

Although this was back in the days when solicitors were ok to wave through '10k for fixtures and fittings', in order to deal with the then cliff-edge stamp duty, so it was a rather different environment.

Good job they were all friends at least!