Stamp Duty in House Purchase

[Tony427]

I'm looking to downsize, only two of us in a 5 bedroom property, and thereby pay off the mortgage. Given the property market atm I'm open to a part exchange type deal to make the whole process easier, or failing that get a normal buyer and we'll rent until we find something we like.

I'm just wondering if a part exchange deal whereby we take the smaller/cheaper house in part exchange can be advantageous from the stamp duty perspective should we be able to negotiate an agreement between the parties in the exchange.

I liken it to a car deal whereby the salesman can either give a large discount off the new car, or a better trade in price on the old jalopy. The net result is the same only the trade in/ purchase figures have changed. However, the goverment doesn't rake in £3 Billion stamp duty on car transactions....... so they might view it differently.

Thoughts gentlemen please?

Cheers,

Tony

[jamesuk28]

I assume whatever price you agree for the PX you will pay stamp duty on, so the lower the better, without obviously taking the pi55.

[deckster]

It used to be (up until around 2002) that you only paid SDLT on the difference if you did a house swap. Sadly these days you pay it on the 'market value' of each property; typically this is the what is actually paid for each property, but if HMRC feel that you are indeed taking the piss they are quite within their rights to charge you what they feel the true value is. Your solicitor should feel very nervous about any kind of behind-the-scenes deal as well as I believe they can get in quite serious trouble if found out.

[flyingjase]

A friend of mine did exactly this quite recently. They knocked £100k of each house to save the stamp duty on that amount, however as previous said I'm sure if HMRC thought you were taking the p**s they would come after you. That said, whose going to know?

[Sagacitas]

Are you looking to part exchange with a developer or as a private sale/purchase?

When we bought our house, from a developer, we learned that the developer would rather give us more for our old house and charge us slightly more for the new house as that makes their sales figures look better. We saved a fair bit of money that way, even with the stamp duty.

However I'm not sure that a developer will do a part exchange when you are trading down. They usually require that the new house is worth some multiple of the old house (in our case 2x).

If you are going to purchase from a developer, and assuming they are publicly traded, find out when their end of year is. the month before their end of year they are more willing to do a good deal (again it makes their sales figures for the year look better).

As I have no experience of part exchanging as part of a private purchase/sale so I can't help you with that.

Richard

[Eric Mc]

flyingjase said:

A friend of mine did exactly this quite recently. They knocked £100k of each house to save the stamp duty on that amount, however as previous said I'm sure if HMRC thought you were taking the p**s they would come after you. That said, whose going to know?

The legal obligation is on the individual and the legal advisors to notify correct values. Failure to do so is a CRIMINAL offence and any solicitor who colluded in such a scheme would be mad, to say the least.

[andy_s]

Use Sharia law, this exploits a loophole in the system (the transfer of funds between buyer/seller and financial institution) to negate paying any stamp duty iirc.

[Eric Mc]

Don't get anything wrong though, because the punishment might be more than a simple fine

Edited by Eric Mc on Saturday 29th March 17:25

[Tony427]

Eric Mc said:

flyingjase said:

A friend of mine did exactly this quite recently. They knocked £100k of each house to save the stamp duty on that amount, however as previous said I'm sure if HMRC thought you were taking the p**s they would come after you. That said, whose going to know?

The legal obligation is on the individual and the legal advisors to notify correct values. Failure to do so is a CRIMINAL offence and any solicitor who colluded in such a scheme would be mad, to say the least.

How does anyone , especially in the current climate, really know what current values are. Houses along our street sell at anywhere between £350k to £750k, so surely its down to what anyone would pay. I suppose the govt could use rating bands to decide values but I think we're all in the same rating bands here anyway.

Not looking to evade tax btw just to reduce liability to the fullest extent without breaking the law.

Cheers,

Tony

PS I like the "Sharia" idea.

[Eric Mc]

The Revenue use a team of valuers (District Valuers) who will "decide" what the true market value of a property is. If you don't like the valuation they pick, you can of course, challenge them at an appeal tribunal or in court. However, they can make the assertion - it is up to YOU to prove them wrong.

Edited by Eric Mc on Saturday 29th March 20:24