Avoiding 3% stamp duty on £260k property?

shibumi

A friend of mine is selling a house with sale agreed of £260k . The buyers want to avoid paying 3% stamp duty by putting the property through at 250K and giving my friend a bankers draft for £10k.
What are the pitfalls of accepting such a deal and if/when should my friend take the £10k bankers draft (exchange or completion?)

Many thanks

grumbler

Not an answer - just a couple of related threads:

Avoiding 3% stamp duty - sensible info required!

Property price at stamp duty threshold

Bossyboots

As described by you, this is fraud.

The old way around this was to make the additional sum (in this case the 10k) the amount paid for fixtures and fittings as a separate transaction. However, the Land Registry got wise to this and now the rule is that this sum has to reflect the true value of the fixtures and fittings.

The most obvious pitfall, apart from being caught out committing fraud, is that they may not come up with the 10k. He cannot (or should not be able to) do this through the solicitors as they then become party to the fraud which they are not allowed to do. He cannot therefore have it incorporated into the contract.

If he can truly value the fixtures and fittings at 10k then he needs to draw up a list of these. This will then form part of the contract and he has a safeguard for the money.

DaisyNelson

Tell the buyers to pat the Stamp Duty, same as everyone else does or buy a cheaper house .

theGrinch

hold out for a change of government

kamaran

Sell him a toothbrush BEFORE exchange for 10K

medical

i am told the inland revenue could then ask you to pay tax on the 10000. pls be careful
medical

meanmachine_2

Well if the buyer hasn't the sense to renegotiate to £250K, then they deserve to cough up.

Why would anyone in today's market buy a property just over the stamp duty threshold? That's madness.

Tell your friend to reduce their offer, or threaten to pull out.

Isn't it obvious?

Lemoncurd

meanmachine wrote:

Tell your friend to reduce their offer, or threaten to pull out.

Isn't it obvious?

You suggesting that the seller threatens to pull out unless the buyer agrees to pay less...???? hmmm :-)

meanmachine_2

Forgive me, I misread the original post.

No, in this circumstance the seller has very little room for manouevre.

I'd be !!!!-a-hoop if I'd found a sucker, I mean buyer willing to pay over the stamp duty threshold.

In fact, I'd be suspicious that they were actually prepared to do so.

Surely the seller hadn't realistically expected an offer above the threshold?

The least worst option is to offer to pay the stamp duty. The worst worst option is that the seller agrees to sell at £250K.

Doozergirl

Your friend should say no. Apart from it being illegal, there's no guarantee the brown envelope will arrive - you don't know these people - and your friend has lost £10k with no leg to stand on.

In my view, your friend should hold ground and try for the full £260k and wait for the buyer to knock them down.

£257,500k or above, take the offer.
Below that but £255k or above, then bring them back to £260k and offer to pay 1% of stamp duty.
If the buyer is still offering below £255k (which they may not at this point) negotiate £260k plus 2% stamp duty paid - the buyer REALLY SHOULD agree to this asitwill cost them £4,400 less than the brown envelope deal.

Your friend walks away with £254,800 at the least, fantastic so near to the threshold.

It sounds complicated, but if you sit down andwork out the maths of it, it's about squeezing the best price legally. Your friend isn't about to lose the buyer over this unless they INSIST on holding on for the full whack - but it is obviously worth negotiating HARD. When push comes to shove, I wouldn't haggle over £5k at that price range in this market.

HTH