Avoiding second home stamp duty - penalties?
Discussion
My partner's sister and husband want to sell their house and their mother's house and all move in together as the mother is now very elderly and dependent on them for daily needs/care.
So far, so simple.
Mother owns her own house and partner's sister and husband own their own house.
They have found a house they all want to buy for about £480,000.
If they both sold their houses at the same time and moved into the new one it would all be fine and stamp duty bill would be £14,000 but partner's sister and husband need to do remedial work to get their house ready for sale - work that they can't do until moved out.
They have savings though and intend to use those to pay their share of the new house purchase with mother and then finish the work on their own house and sell it.
Plan is to sell mother's house, and using savings, all three of them will move in together. Partner's sister and husband will then finish the work on their house and sell it probably 2/3 months after completion of the joint house purchase.
For stamp duty purposes this will mean that technically they will own two houses for about 2/3 months.
Because of this, they will be required to pay second home stamp duty rate giving them a bill of £28,000 rather than £14,000.
Apparently, once their house is sold, they can then apply for a full refund of the £14,000 extra.
Money is tight and they're thinking about just not telling the solicitor about the home they currently own and so just paying the £14,000 stamp duty.
What are the likely problems or penalties for this?
Obviously, it's breaking the 'rules' but the amount of tax paid will be the correct amount eventually as the extra second home £14,000 would be refunded a few months later.
Is it possible to 'get away' with this?
If they got caught, what would the likely penalty be given the loss to the tax people would only be the interest on £14,000 for about 3 months.
Is their likely to be a punitive aspect to any penalty?
So far, so simple.
Mother owns her own house and partner's sister and husband own their own house.
They have found a house they all want to buy for about £480,000.
If they both sold their houses at the same time and moved into the new one it would all be fine and stamp duty bill would be £14,000 but partner's sister and husband need to do remedial work to get their house ready for sale - work that they can't do until moved out.
They have savings though and intend to use those to pay their share of the new house purchase with mother and then finish the work on their own house and sell it.
Plan is to sell mother's house, and using savings, all three of them will move in together. Partner's sister and husband will then finish the work on their house and sell it probably 2/3 months after completion of the joint house purchase.
For stamp duty purposes this will mean that technically they will own two houses for about 2/3 months.
Because of this, they will be required to pay second home stamp duty rate giving them a bill of £28,000 rather than £14,000.
Apparently, once their house is sold, they can then apply for a full refund of the £14,000 extra.
Money is tight and they're thinking about just not telling the solicitor about the home they currently own and so just paying the £14,000 stamp duty.
What are the likely problems or penalties for this?
Obviously, it's breaking the 'rules' but the amount of tax paid will be the correct amount eventually as the extra second home £14,000 would be refunded a few months later.
Is it possible to 'get away' with this?
If they got caught, what would the likely penalty be given the loss to the tax people would only be the interest on £14,000 for about 3 months.
Is their likely to be a punitive aspect to any penalty?
footnote said:
My partner's sister and husband want to sell their house and their mother's house and all move in together as the mother is now very elderly and dependent on them for daily needs/care.
So far, so simple.
Mother owns her own house and partner's sister and husband own their own house.
They have found a house they all want to buy for about £480,000.
If they both sold their houses at the same time and moved into the new one it would all be fine and stamp duty bill would be £14,000 but partner's sister and husband need to do remedial work to get their house ready for sale - work that they can't do until moved out.
They have savings though and intend to use those to pay their share of the new house purchase with mother and then finish the work on their own house and sell it.
Plan is to sell mother's house, and using savings, all three of them will move in together. Partner's sister and husband will then finish the work on their house and sell it probably 2/3 months after completion of the joint house purchase.
For stamp duty purposes this will mean that technically they will own two houses for about 2/3 months.
Because of this, they will be required to pay second home stamp duty rate giving them a bill of £28,000 rather than £14,000.
Apparently, once their house is sold, they can then apply for a full refund of the £14,000 extra.
Money is tight and they're thinking about just not telling the solicitor about the home they currently own and so just paying the £14,000 stamp duty.
What are the likely problems or penalties for this?
Obviously, it's breaking the 'rules' but the amount of tax paid will be the correct amount eventually as the extra second home £14,000 would be refunded a few months later.
Is it possible to 'get away' with this?
If they got caught, what would the likely penalty be given the loss to the tax people would only be the interest on £14,000 for about 3 months.
Is their likely to be a punitive aspect to any penalty?
Blatant tax evasion?So far, so simple.
Mother owns her own house and partner's sister and husband own their own house.
They have found a house they all want to buy for about £480,000.
If they both sold their houses at the same time and moved into the new one it would all be fine and stamp duty bill would be £14,000 but partner's sister and husband need to do remedial work to get their house ready for sale - work that they can't do until moved out.
They have savings though and intend to use those to pay their share of the new house purchase with mother and then finish the work on their own house and sell it.
Plan is to sell mother's house, and using savings, all three of them will move in together. Partner's sister and husband will then finish the work on their house and sell it probably 2/3 months after completion of the joint house purchase.
For stamp duty purposes this will mean that technically they will own two houses for about 2/3 months.
Because of this, they will be required to pay second home stamp duty rate giving them a bill of £28,000 rather than £14,000.
Apparently, once their house is sold, they can then apply for a full refund of the £14,000 extra.
Money is tight and they're thinking about just not telling the solicitor about the home they currently own and so just paying the £14,000 stamp duty.
What are the likely problems or penalties for this?
Obviously, it's breaking the 'rules' but the amount of tax paid will be the correct amount eventually as the extra second home £14,000 would be refunded a few months later.
Is it possible to 'get away' with this?
If they got caught, what would the likely penalty be given the loss to the tax people would only be the interest on £14,000 for about 3 months.
Is their likely to be a punitive aspect to any penalty?
The sale value of the mother's house + the savings of the partner's sister & husband will enable them to buy the new joint property for all of them.
They will have enough left over (about £30k ish) to cover normal stamp duty and finish the works they need to do on their own house (new bath and kitchen etc) to enable them to sell it for the normal market price rather than a knock down builder's refurn project price.
They will then sell it and move in with the mother and put their savings back in the bank.
They will own 2 homes for approx 3 months max - there is no attempt to deprive the tax people of the full amount of tax due as the second home amount would have to be refunded anyway when the house is sold.
The full amount of tax due is £14,000 and the amount paid wil be £14,000.
I understand from internet research (ha!) that a solicitor is obliged to ask if they already own a home when the stamp duty forms are completed.
They could lie at this point. Why would a solicitor check at the land registry. The fraud would be by the clients not the solicitor.
Anyne know what the penalty could be for this fraud?
They will have enough left over (about £30k ish) to cover normal stamp duty and finish the works they need to do on their own house (new bath and kitchen etc) to enable them to sell it for the normal market price rather than a knock down builder's refurn project price.
They will then sell it and move in with the mother and put their savings back in the bank.
They will own 2 homes for approx 3 months max - there is no attempt to deprive the tax people of the full amount of tax due as the second home amount would have to be refunded anyway when the house is sold.
The full amount of tax due is £14,000 and the amount paid wil be £14,000.
I understand from internet research (ha!) that a solicitor is obliged to ask if they already own a home when the stamp duty forms are completed.
They could lie at this point. Why would a solicitor check at the land registry. The fraud would be by the clients not the solicitor.
Anyne know what the penalty could be for this fraud?
footnote said:
Anyne know what the penalty could be for this fraud?
It would attract a penalty payment up to 100% of the SDLT payable (i.e. £28k based on your figure of £28k above) plus payment of the original duty and interest and would of course be a criminal offence too. HMRC have 21 years to come after you for deliberate avoidance. Depending on when the transaction happens, the penalty may be higher than 100% of the duty; I have seen reference somewhere to a proposed increase to 200% but there's no date for that to be introduced, if at all.
Jobbo said:
footnote said:
Anyne know what the penalty could be for this fraud?
It would attract a penalty payment up to 100% of the SDLT payable (i.e. £28k based on your figure of £28k above) plus payment of the original duty and interest and would of course be a criminal offence too. HMRC have 21 years to come after you for deliberate avoidance. Depending on when the transaction happens, the penalty may be higher than 100% of the duty; I have seen reference somewhere to a proposed increase to 200% but there's no date for that to be introduced, if at all.
How likely is that outcome do you know? Both in the sense of being discovered and / or penalised to that extent?
I think the way the partner's sister and husband are looking at this is that it seems an excessive call on their generosity to ask them to lend the Tax people £14k for 3 months.
They would probably have to borrow the £14k - they hope from me - and the tax people are obligated to refund it anyway.
Their alternative is to try and sell their house at the same time as the mother's which adds another layer of complexity and difficulty to the transaction - trying to secure the additional sale and then synchronise another completion date.
They would probably have to borrow the £14k - they hope from me - and the tax people are obligated to refund it anyway.
Their alternative is to try and sell their house at the same time as the mother's which adds another layer of complexity and difficulty to the transaction - trying to secure the additional sale and then synchronise another completion date.
footnote said:
That sounds like a worst case scenario!
How likely is that outcome do you know? Both in the sense of being discovered and / or penalised to that extent?
Probably more likely than not if you post about it on a public forum, demonstrating a deliberate advance intention to lie to HMRC.How likely is that outcome do you know? Both in the sense of being discovered and / or penalised to that extent?
footnote said:
I think the way the partner's sister and husband are looking at this is that it seems an excessive call on their generosity to ask them to lend the Tax people £14k for 3 months.
They would not be lending HMRC anything, they are simply complying with the legal requirement to pay the tax due and then make a subsequent reclaim when the circumstances change.footnote said:
They would probably have to borrow the £14k - they hope from me - and the tax people are obligated to refund it anyway.
Their alternative is to try and sell their house at the same time as the mother's which adds another layer of complexity and difficulty to the transaction - trying to secure the additional sale and then synchronise another completion date.
Tough!Their alternative is to try and sell their house at the same time as the mother's which adds another layer of complexity and difficulty to the transaction - trying to secure the additional sale and then synchronise another completion date.
Jobbo said:
footnote said:
That sounds like a worst case scenario!
How likely is that outcome do you know? Both in the sense of being discovered and / or penalised to that extent?
Probably more likely than not if you post about it on a public forum, demonstrating a deliberate advance intention to lie to HMRC.How likely is that outcome do you know? Both in the sense of being discovered and / or penalised to that extent?
footnote said:
They will have enough left over (about £30k ish) to cover normal stamp duty and finish the works they need to do on their own house (new bath and kitchen etc) to enable them to sell it for the normal market price rather than a knock down builder's refurn project price.
It may make it easier to sell but getting the value (and more) back is a bit of gamble. I'm often amazed by the prices houses in need of refurb go for - I reckon a lot of people have no idea of the cost involved.footnote said:
They will own 2 homes for approx 3 months max - there is no attempt to deprive the tax people of the full amount of tax due as the second home amount would have to be refunded anyway when the house is sold.
You've no idea how long it will take to sell and even once sold 3 months for the process itself is nothing.footnote said:
Why would a solicitor check at the land registry. The fraud would be by the clients not the solicitor.
Not sure if serious.sidicks said:
footnote said:
Cheers for the insight!
I thought it was clear I understood the literal implications of the scenario outlined?
No idea what point you are trying to make?I thought it was clear I understood the literal implications of the scenario outlined?
The fact that you are even considering this speaks volumes.
Secondly, what do the volumes say?
This is a technical rule break as well you know.
It concerns three peple who are trying to achieve something which in truth costs the state nothing.
The difficulty ordinary people face in handing over £14k for 3 months is not replicated in kind by any difficulty faced by the state.
What is the administrative cost of collecting £28k and the refunding £14k 3 months later? I don't know - less than 3 months interest on £14k I suspect.
You know this.
That these people are then going to spend their time caring for someone who could be costing the state money in carers is neither here nor there.
This is not about justice or rightness or joined-up thinking.
It's a straight-up question - what is the liklihood of them getting away with breaking this rule?
I've made it clear, they will pay the stamp duty of £14k which is all that would be due in any case.
Rules are rules, sure, but they're not doing a runner with anybody's pension fund - so a bit of perspective would be nicer than pedantry.
Just volunteer an opinion maybe - yep, they might get away with it but if they didn't the cost would most likely be this... whatever that is...(realistically)
Or no, I don't think they would get away with it because....
Gassing Station | Finance | Top of Page | What's New | My Stuff