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Stam duty on a property bought under market value

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    Stam duty on a property bought under market value

    I may be in a position where I can buy a house from a relative at below market value. How is stamp duty calculated on a transaction like this?

    A search of the net gives me varied answers from

    the stamp duty will be levied at the full market value because relative is a connected person and therefore the deemed price of the transfer will be the market price, regardless of the actual value offered
    to

    the tax due is on the bona fide transaction value of the sale, so your SDLT will be on this value regardless of the "market value" whatever that is at the time
    Has anyone been in a similar position? It makes a difference of about 10 grand! bloody hell!
    It's about time I changed this sig...

    #2
    A difference of ten grand, so the property must be valued well in excess of one million pounds.

    Below market, what, about 10% below market say.

    So a difference of £10,000 in each million of value = an approximate value of ten million pounds, less a million discount would save you approx £10,000 in duty, if they rate at sale, not market value. correct?
    Confusion is a natural state of being

    Comment


      #3
      No the big difference is because the 'market value' is in the 3% band, whereas what we might be able to pay for it is in the 1% band.

      For example

      We pay 200k -
      1% on 200k = £2k

      House is actually worth £400k -
      3% on 400k = £12k

      Difference = £10k
      It's about time I changed this sig...

      Comment


        #4
        Originally posted by MrRobin View Post
        No the big difference is because the 'market value' is in the 3% band, whereas what we might be able to pay for it is in the 1% band.

        For example

        We pay 200k -
        1% on 200k = £2k

        House is actually worth £400k -
        3% on 400k = £12k

        Difference = £10k
        Ah! get you.
        Never looked at the stamp bands before. I thought it was a thou in every hundred thou.
        Apologies
        Confusion is a natural state of being

        Comment


          #5
          Your first advice is correct. And doing the deal at a low price, avoiing stamp duty will count as tax fraud.

          Comment


            #6
            Why is it fraud? We're not buying at a lower price just in order to avoid tax, we're doing it to take advantage of a generous offer. If the tax form says 'what was the value of the transaction?' and I put £200k, where is the fraud in that?!

            I would appreciate a link to a HMRC doc if you know this is true. Only thing I can find about connected persons under SDLT is about when relatives buy a property together, and the total tax due is on the combined value - i.e. if I and my brother buy a £300k property, we don't pay £150k @ 1% each, we pay £150k x 3% each even though 150 is under the 3% band, because 300 is over.
            Last edited by MrRobin; 16 March 2008, 19:57.
            It's about time I changed this sig...

            Comment


              #7
              Why does it matter so much? I know it's £10k and £10k is usually a lot of money, but at it's worst, you're getting a house worth £400k for £212k - surely that should still be a good enough deal for you?

              It's a bargain whichever you look at it!

              Comment


                #8
                Originally posted by MrRobin View Post
                Why is it fraud? We're not buying at a lower price just in order to avoid tax, we're doing it to take advantage of a generous offer. If the tax form says 'what was the value of the transaction?' and I put £200k, where is the fraud in that?!

                I would appreciate a link to a HMRC doc if you know this is true. Only thing I can find about connected persons under SDLT is about when relatives buy a property together, and the total tax due is on the combined value - i.e. if I and my brother buy a £300k property, we don't pay £150k @ 1% each, we pay £150k x 3% each even though 150 is under the 3% band, because 300 is over.
                I's fraud because you are gaining a asset worth that amount regardless of what you actually paid for it. What, you think the tax system is fair? Actually, it is fair. That's a deemed fairness, in line with every other stupid thing this government has done.

                The real answer is ask your solicitor and get them to work it out and sort the legalities. Then, if they get it wrong, they pay the fines, not you.
                Blog? What blog...?

                Comment


                  #9
                  Originally posted by ruth11 View Post
                  Why does it matter so much? I know it's £10k and £10k is usually a lot of money, but at it's worst, you're getting a house worth £400k for £212k - surely that should still be a good enough deal for you?

                  It's a bargain whichever you look at it!
                  What a ridiculous thing to say! First of all, ten grand is ten grand whether it is because you saved 200 thousand compared to 190 thousand or because you save 10k compared with nothing. I'm not saying if the extra is payable then forget it, I know it is a good deal either way, I'm just trying to find out the facts to plan forward.
                  Secondly, I would find ways to legitimately reduce the amount I pay El Gordo by 10 pence if I could!

                  Originally posted by malvolio
                  I's fraud because you are gaining a asset worth that amount regardless of what you actually paid for it.
                  I disagree. Why should my good fortune be regarded as fraud?! If you went to buy an item in the shop priced at £100 but when you went to the till, it was reduced to £50, would you say "hold on, I should pay the VAT on the £100, otherwise it is fraud!"
                  It's about time I changed this sig...

                  Comment


                    #10
                    Originally posted by MrRobin View Post
                    What a ridiculous thing to say! First of all, ten grand is ten grand whether it is because you saved 200 thousand compared to 190 thousand or because you save 10k compared with nothing. I'm not saying if the extra is payable then forget it, I know it is a good deal either way, I'm just trying to find out the facts to plan forward.
                    Secondly, I would find ways to legitimately reduce the amount I pay El Gordo by 10 pence if I could!



                    I disagree. Why should my good fortune be regarded as fraud?! If you went to buy an item in the shop priced at £100 but when you went to the till, it was reduced to £50, would you say "hold on, I should pay the VAT on the £100, otherwise it is fraud!"

                    It's not ridiculous. It's about perspective. You seem to be viewing this tax in the wrong way. Why are you so bitter? Snivelling about the injustice of it all, doesn't change anything. I have no idea if you have to pay the extra £10k, but I certainly wouldn't be worrying about it on this kind of deal. Pay it, get on with enjoying your new house (or money, if you sell it on) and don't worry about El Gordo. It's not worth the hassle.

                    Obviously this is all just my thoughts, which for some reason, I seem to be saying out loud today! Very not like me! I am aware that I'm a lot more laid back than most and maybe you see it as a bad thing. I guess you're a half empty kind of fellow where-as I'm more your half-full kinda gal. Just my outlook on life over yours. For some reason, today I decided to try to pass on my chilled-out attitude, but all I appear to have done is riled you some more, for which I apologise.

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