Stamp Duty second homes

[andharri]

Hi,

I am in the process of looking to move from my flat into a house. Ideally I would like to keep my flat on as I think it would make a great investment. However the "second home" extra stamp duty would be quite a lot for the house I am looking to buy.

So I thought would the following be possible

- I sell my flat to my brother (who owns no property) for £1 (incurring no stamp duty)
- I then buy my house paying the standard stamp duty rate
- I buy flat back off of brother for £1

What do you think?

[PBDirector]

I think that’s a genius idea! You should totally do it, and keep this thread updated with how you get on.

If you like, you can sell the house to me for £10k, then I’ll sell it back to you for the same. It’ll be exactly the same but obviously you’ll look like you have £10k more and that’s gotta be good! Let’s do it!

[anothernameitist]

??
What have I missed here

[Nigel_O]

...or you could simply state that the house will be your main residence, and then you'll only pay stamp duty at the standard rate

Watch out for CGT on the flat though...

[The jiffle king]

andharri said:

Hi,

I am in the process of looking to move from my flat into a house. Ideally I would like to keep my flat on as I think it would make a great investment. However the "second home" extra stamp duty would be quite a lot for the house I am looking to buy.

So I thought would the following be possible

- I sell my flat to my brother (who owns no property) for £1 (incurring no stamp duty)
- I then buy my house paying the standard stamp duty rate
- I buy flat back off of brother for £1

What do you think?

The taxman is coming.......

[anonymous-user]

What does your brother think about becoming embroiled in a stamp duty evasion scheme from which he derives no discernible benefit?

[anonymous-user]

Idea with epic fail written all over it.

[jamei303]

How much spare money do you have ready to fight a court case against HMRC?

[GT03ROB]

Dear god...education these days....

[andharri]

Thanks for the PHesque replies!

I am well aware it's probably dodgy, I am just curious as to exactly what rules it would be breaching?

[springfan62]

If you sold it for a £1 to someone at arms length the plan would work a treat, just so long as you can convince them to sell it back to you for a £1.

Being serious though you could set up a limited company and sell the flat to that and then you would only be liable for the additional sdlt on the lower value.

[springfan62]

andharri said:

Thanks for the PHesque replies!

I am well aware it's probably dodgy, I am just curious as to exactly what rules it would be breaching?

Transactions between connected parties are charged on the market value of the property, hence selling to a third party for a £1 would be fine.

[andharri]

springfan62 said:

If you sold it for a £1 to someone at arms length the plan would work a treat, just so long as you can convince them to sell it back to you for a £1.

Being serious though you could set up a limited company and sell the flat to that and then you would only be liable for the additional sdlt on the lower value.

That's something I have considered also, I might investigate further. Thanks

[Durzel]

HMRC are certainly idiots and not at all mercilessly strident in their pursuit of suspected tax evasion.

[Mandat]

Durzel said:

HMRC are certainly idiots and not at all mercilessly strident in their pursuit of suspected tax avoidance.

Tax avoidance is perfectly acceptable. It's tax evasion that you need to be worried about.

[Durzel]

Mandat said:

Tax avoidance is perfectly acceptable. It's tax evasion that you need to be careful about.

I edited it before you replied, but not in time I guess. Always get those two mixed up

[anonymous-user]

springfan62 said:

andharri said:

Thanks for the PHesque replies!

I am well aware it's probably dodgy, I am just curious as to exactly what rules it would be breaching?

Transactions between connected parties are charged on the market value of the property, hence selling to a third party for a £1 would be fine.

You absolutely sure about that? I’d think that HMRC would be miffed on their potential STLD loss! Happy to be educated

[andharri]

garyhun said:

You absolutely sure about that? I’d think that HMRC would be miffed on their potential STLD loss! Happy to be educated

This is why I started the thread, it seems mad to me that it would be legal.

[V8LM]

I think if you advertised it openly and sold for a £1, then so be it. But as soon as you have an agreement to buy it back from the buyer then you both end up paying duty at the market value, and go to gaol.

[jamei303]

You can avoid stamp duty entirely if you conduct the transaction without producing any stampable documents. This is because its not actually a tax on property purchases but a document fee. This would mean not registering title at the Land Registry, but that might not be important for everyone.