Swap house plus cash - legally avoid stamp duty?

Bigphil1474

We're selling our house. Had 3 valuations by estate agents, all pretty similar. As they say, it is just a marketing price not an actual valuation. We're lucky enough to have some cash to add on to what we get for the house as we are looking for somewhere bigger in the same area.

We recently went to view a house which we love. Turns out the owners have recently divorced and the current occupier is looking to down size. They have since had a look at our house and are interested, although nothing confirmed yet. 

In basic terms, our house is worth about £100k less than theirs, so a swap plus cash is viable.

If, for example, their house was marketed at £285k and ours £185k, could we 'offer' them £250k and they 'offer' us £150k for ours, so we still give them £100k cash and we swap, but we wouldn't then pay stamp duty of about £2k?  Appreciate if we offered them £100,001 and gave them our house, that would look pretty suss, but is a 10-20% offer below marketed price likely to throw any flags up? We don't have a mortgage, they may well do.

We'd obviously both save on EA fees as well - ours are 0.9% + VAT, so we'd save around £400 on that and the sellers would save similar. Sounds a cunning plan but am I missing the obvious?

UnderOffer

How are you going to pay the £100k, surely your solicitor will handle the transaction and therefore declare and pay the stamp duty? The sold price will still be £250k and notified to land registry? 

Re EA fees, is the house you viewed not currently advertised? If you’ve seen it on Rightmove or equivalent and made appointment with EA to view then fees will be due, EA always follow up and are known to issue bills to a vendor when they think someone they introduced to a sale but since cancelled contract to try and avoid the fee. They get info of sales from land registry monthly updates and other sources. 

user1977

In short, no, you pay SDLT on the total consideration, whether that's cash, a house, or anything else you're bartering with.

I think in the (very) old days you could save on stamp duty this way, but that was stopped decades ago.

The EA isn't going to be fooled either though I suspect you'd want to read their contract carefully.

theartfullodger

Indeed. And HMRC have the power to tax you at market value.  

The country and the people need the money.  Not keen on this sort of attitude.. which sadly starts high up with that family..

Best wishes to all 

propertyrental

EA fees: depends on the respective contracts each seller has signed.(sole agency? sole selling rights?) but it is likely that the terms will allow the EAs to claim their fees.
 
SDLT. Only practical, but illegal, way to do this would be to not tell the respective solicitors, have contracts drawn up that do not include the extra payment, and then trust each other enough to actually make that extra, illegal and unenforceable payment.

If the extra payment was then not made someoe would be seriously out of pocket.

And if HMRC found out.....

EssexHebridean

You have the potential to create way more problems than you solve with this scheme. Seriously, we all know SDLT is a pain, but it does have to be factored into the costs of moving and paid - if things are that tight that you’re struggling with that amount perhaps right now isn’t the right time for you to move? 

_Penny_Dreadful

Bigphil1474 said:

We're selling our house. Had 3 valuations by estate agents, all pretty similar. As they say, it is just a marketing price not an actual valuation. We're lucky enough to have some cash to add on to what we get for the house as we are looking for somewhere bigger in the same area.

We recently went to view a house which we love. Turns out the owners have recently divorced and the current occupier is looking to down size. They have since had a look at our house and are interested, although nothing confirmed yet. 

In basic terms, our house is worth about £100k less than theirs, so a swap plus cash is viable.

If, for example, their house was marketed at £285k and ours £185k, could we 'offer' them £250k and they 'offer' us £150k for ours, so we still give them £100k cash and we swap, but we wouldn't then pay stamp duty of about £2k?  Appreciate if we offered them £100,001 and gave them our house, that would look pretty suss, but is a 10-20% offer below marketed price likely to throw any flags up? We don't have a mortgage, they may well do.

We'd obviously both save on EA fees as well - ours are 0.9% + VAT, so we'd save around £400 on that and the sellers would save similar. Sounds a cunning plan but am I missing the obvious?

A plan so cunning you could pin a tail on it and call it a weasel. It’s a wonder no one else has ever attempted this before. 

You will be paying £285k for their house so will pay SDLT on £285k and they would pay £185k for your house along with SDLT on £185k. The amount of SDLT due is based on the consideration paid not just the cash you hand over. 

Bluebell1000

I think some people are thinking that you're giving them extra cash on top. My understanding of your proposal is that you sell them your house for £150k, and they buy your house for £250k.

I think the £100k cash bit is perhaps confusing things slightly, when what you're meaning is that there's £100k difference in your house values, and so as long as the difference between the prices paid stays the same, no-one is any worse off? Does that sound right?

There is a risk that if one of you were to sell in a relatively short space of time, you might get a thread on here complaining that someone wants a lot more money than the house sold for last year, and prices haven't risen that much etc...  

Personally I'd probably do it, if they agree as well. I can't advise what might happen with stamp duty, but you should still make sure that you have money available to pay it if needed. 

SDLT_Geek

With a property exchange, each party pays SDLT on the market value of the property they acquire (or, if more, on the value of cash / other property, given for it).  There might be a little wriggle room on an honest assessments of the market value, but not much.

Bigphil1474

Apologies, probably misunderstood due to how I set it out. Bluebell understood.
Not trying to avoid EA fees - they charge 1% + vat, so the lower the selling price the less fees. If I sold at 150 vs 180 it would be less.
I was proposing offering 250k, 100k would be our cash, and 150k from sale of property. They would still end up with 100k cash and our property.

If stamp duty was paid purely on the value and not the actual sale price that would make no sense. There is no stamp duty below 250k for us as its main home, they wouldn't pay any either.

We've plenty of cash btw, we just don't want to waste it. 3-4 k would pay for all the fees. To be fair, their house does need some work so a reduced price could be argued on that, and so does ours. I'll see where we go with it, but I've not heard anything that confirms it's illegal.

user1977

Bigphil1474 said:

To be fair, their house does need some work so a reduced price could be argued on that, and so does ours. 

Then you need to tell us what the houses are actually worth (which is also what HMRC would be looking at), rather than some EA's inflated idea of asking prices.