Tainted Gifts?

[corevalue]

Tainted gifts

Tainted gifts are another extremely problematic issue. The realisable amount includes the value of any property held to be a tainted gift, defined as any transfer at undervalue after the date the offences commenced. Where assets are transferred to third parties at an undervalue and are subsequently dissipated, they are still classed as a tainted gift. The defendant is then ordered to pay the equivalent amount, even if the asset is worthless or has vanished (an example is shown in the box below).

tainted gifts

In 2009 Y, a former civil servant, was convicted of fraud offences occurring in 2005 leading to confiscation proceedings.

In 2006 Y sold their house to their daughter for £300,000.

A valuation obtained by the prosecution showed the market price in 2006 was £350,000. Accordingly the house was held to have been sold at an undervalue and was therefore a tainted gift.

A valuation of the house in 2009 showed that the house had fallen in value to £250,000. Nevertheless, the confiscation order of Y was increased by £50,000 because the gift was valued at the time it was given.

Somebody help me out here. The implication is that we can't ever have a HPC, because by selling your house at BMV you could be making a tainted gift.

Example of POCA

[Self Employed Youth]

Somebody help me out here. The implication is that we can't ever have a HPC, because by selling your house at BMV you could be making a tainted gift.

Example of POCA

Every house sold under the 'Right to Buy', and the semi privatised state sponsored, 'right to acquire', is a tainted gift.

It need not be one though.

If every person was allowed to purchase a dwelling of suitable size for their family and achieve a stake in society, then it could be a revolutionary social safety trampoline.

***Rooms to rent in London, only 100% of £200 (the minimum wage for the full time working week after taxes), per week. These are fully furnished (bed plus electric lamp) sheds with communal kitchens and even toilet facilities!***

[The Knimbies who say No]

Somebody help me out here. The implication is that we can't ever have a HPC, because by selling your house at BMV you could be making a tainted gift.

Example of POCA

pretty nuts, especially as it is under 15% away from the supposed value. I wonder how they do it though, as there's potential for a pickle on my street. two up for sale, both at £170k, last one sold at £128k. If they get an 'expert' in to value it I imagine you're screwed.

Chin up though, the hoose was worth £350k in 2006 and now it's £250k!

[bewildered_renter]

Somebody help me out here. The implication is that we can't ever have a HPC, because by selling your house at BMV you could be making a tainted gift.

Example of POCA

Surely it only applies if they have convicted you of crime and are pursuing you for the proceeds of your criminality.

Whilst I can see that there are some big issues with how it works, I fail to see how it affects most people.

[Milton]

Yours house is worth what the governmnet says....

And yet my MP likes to state, that its best we let the free market set the prices of houses.

Edited August 12, 2011 by Milton

[Mr. Miyagi]

Somebody help me out here. The implication is that we can't ever have a HPC, because by selling your house at BMV you could be making a tainted gift.

Example of POCA

No, this only applies if you have been convicted of a criminal offence(s) and have been deemed under the Act to have a criminal lifestyle. It does not apply to BMV transactions by non criminal members of the public.

[rxe]

Would also happen if they suspected you were disposing of assets without paying capital gains tax.

[thod]

Houses are only one such example, it could apply to any asset. Suppose you have built up a large amount of capital in your company but don't want to pay it to yourself because that would attract income tax. So your company buys a house and sells it to you for £1. You have the asset but have payed no tax.

[deeplyblue]

Somebody help me out here. The implication is that we can't ever have a HPC, because by selling your house at BMV you could be making a tainted gift.

Only if you're selling it to a relative (or other interested party). In this case the bloke was selling it to his daughter (IIRC) - she was getting a £350K house for £300K - which HMRC (or whoever) thought was actually a gift of £50K to the daughter which the father was hoping no one would notice. Now if there were money laundering involved (not that I have any reason to suppose there was) or an attempt to hide assets for some other reason, then parties other than HMRC would be involved.

One standard reason for this sort of transaction is to try to reduce your assets so that when someone calculates what you can be charged for care home fees, then the sum is as small as possible. In fact selling the "family home" to one of the children for less than its full value, leaving the person going into care with much less in the way of assets was such a standard dodge that they've made it illegal - "deliberate divestment of assets" (or some such phrase). Don't quote me on this - IANAL.

You can see more on that particular issue by goggling it, or searching through the www.ageuk.org.uk site

db

[leicestersq]

Only if you're selling it to a relative (or other interested party). In this case the bloke was selling it to his daughter (IIRC) - she was getting a £350K house for £300K - which HMRC (or whoever) thought was actually a gift of £50K to the daughter which the father was hoping no one would notice. Now if there were money laundering involved (not that I have any reason to suppose there was) or an attempt to hide assets for some other reason, then parties other than HMRC would be involved.

One standard reason for this sort of transaction is to try to reduce your assets so that when someone calculates what you can be charged for care home fees, then the sum is as small as possible. In fact selling the "family home" to one of the children for less than its full value, leaving the person going into care with much less in the way of assets was such a standard dodge that they've made it illegal - "deliberate divestment of assets" (or some such phrase). Don't quote me on this - IANAL.

You can see more on that particular issue by goggling it, or searching through the www.ageuk.org.uk site

db

Well put. I bet they only catch a few of the crimes.

There is a case for housing that all changes of ownership should go through an open bidding process of some sort.

[Lepista]

Not much of a gift, though, was it - a meaasly £50k on a £300k spend.

Should have sold it for the full £350k, but had a valuer come in and discount for structural failings, surely?

[corevalue]

Only if you're selling it to a relative (or other interested party). In this case the bloke was selling it to his daughter (IIRC) - she was getting a £350K house for £300K - which HMRC (or whoever) thought was actually a gift of £50K to the daughter which the father was hoping no one would notice. Now if there were money laundering involved (not that I have any reason to suppose there was) or an attempt to hide assets for some other reason, then parties other than HMRC would be involved.

One standard reason for this sort of transaction is to try to reduce your assets so that when someone calculates what you can be charged for care home fees, then the sum is as small as possible. In fact selling the "family home" to one of the children for less than its full value, leaving the person going into care with much less in the way of assets was such a standard dodge that they've made it illegal - "deliberate divestment of assets" (or some such phrase). Don't quote me on this - IANAL.

You can see more on that particular issue by goggling it, or searching through the www.ageuk.org.uk site

db

Thanks for the concise answer. It also occurred to me that it was to avoid stamp duty, and that would be the criminal offence. Would the authorities consider a BMV sale to an interested party as tax evasion? Would liar loans be considered as criminal enterprise? (Obtaining money by deception etc.)

[leicestersq]

Thanks for the concise answer. It also occurred to me that it was to avoid stamp duty, and that would be the criminal offence. Would the authorities consider a BMV sale to an interested party as tax evasion? Would liar loans be considered as criminal enterprise? (Obtaining money by deception etc.)

If you sell in an open market process, then the price obtained by definition is the market value. It is only closed sales that could come under suspicion. And so they should, why else would you do a closed sale unless you wanted to diddle the taxpayer?

Liar loans are a criminal enterprise, though if you ran a bank in the noughties and ran these scams, you were immune from prosecution and received a state sponsored pension.

[Guest tbatst2000]

why else would you do a closed sale unless you wanted to diddle the taxpayer?

There are legitimate reasons. For example, a long time ago, I sold my flat to a friend who had always said he wanted to buy it if I decided to move. We got three valuations, looked at prices of other sales locally and agreed a number without ever going through the hassle of having it on the market with viewings and all the rest of it. As far as both of us can tell he paid pretty much what it would have fetched if sold openly and, additionally, we split the difference on the estate agents fees that I avoided.

[Lepista]

Why is it "diddling the taxpayer"

Say I bought a house 30 years ago for £30k. fast forward to today, I'm cash rich, and want to sell the same house to my son, for £30k.

It's irrelevant what the "market" says it is - I have made no gain or loss on the sale, so surely the "taxable beenfit" is zero?

why should we buy into this mantra about "market value"? Utter nonsense to prise as much money into the hands of the government as possible, and we should avoid it at all costs.

[Guest tbatst2000]

Why is it "diddling the taxpayer"

Say I bought a house 30 years ago for £30k. fast forward to today, I'm cash rich, and want to sell the same house to my son, for £30k.

It's irrelevant what the "market" says it is - I have made no gain or loss on the sale, so surely the "taxable beenfit" is zero?

why should we buy into this mantra about "market value"? Utter nonsense to prise as much money into the hands of the government as possible, and we should avoid it at all costs.

I'm inclined to agree but, since we have inheritance tax, the Inland Revenue would beg to differ. If you sell it to your son for 30K and then you survive for 7 years, then it's all fine but, if you die before that, the difference between 30K and the market price of the house when you sold it will form part of your estate and may push you over the tax free limit.

[billybong]

How about the concept of *tainted theft if a house has been overvalued when sold with the government, estate agents, solicitors (as well as the seller) gaining.

No they wouldn't like that, the UK housing market is a one way street for them.

*tainted because it's a theft approved by TPTB.

Edited August 12, 2011 by billybong

[leicestersq]

There are legitimate reasons. For example, a long time ago, I sold my flat to a friend who had always said he wanted to buy it if I decided to move. We got three valuations, looked at prices of other sales locally and agreed a number without ever going through the hassle of having it on the market with viewings and all the rest of it. As far as both of us can tell he paid pretty much what it would have fetched if sold openly and, additionally, we split the difference on the estate agents fees that I avoided.

Well we dont know what the market value of your flat was do we? The only way you can ever know is to sell it to the highest bidder. If what you say is true, and the price was fair, your mate would have got it at auction for that price, but that process would have been transparent and above suspicion. However, whilst some sales might be honest, the principle of allowing them to happen means that there will be large numbers that are not. The only fair way is to have an open auction of some sort.

I take the bit about the estate agents fee, avoiding that is legit.

[leicestersq]

Why is it "diddling the taxpayer"

Say I bought a house 30 years ago for £30k. fast forward to today, I'm cash rich, and want to sell the same house to my son, for £30k.

It's irrelevant what the "market" says it is - I have made no gain or loss on the sale, so surely the "taxable beenfit" is zero?

why should we buy into this mantra about "market value"? Utter nonsense to prise as much money into the hands of the government as possible, and we should avoid it at all costs.

Because there is a transaction here that is liable to be taxed at a certain rate. You can reduce the bill by stating a transaction charge that is out of line with the market charge, which means someone somewhere has to pay more tax, and/or someone gets less of a taxpayer handout.

You can argue whether or not there should be a transaction tax of this sort, but if there should, then an open market auction is the only fair and transparent way of determining the market value on which that transaction is based.

[Guest tbatst2000]

Well we dont know what the market value of your flat was do we? The only way you can ever know is to sell it to the highest bidder.

That may be technically true, but it's not relevant from a tax perspective. Generally speaking, the IR (and CRA in my case) consider an independent valuation by a market professional to be acceptable evidence of value. If I'd sold to my friend at a price outside of the range of the 3 valuations I received, then maybe they'd be interested had the flat been worth enough to attract stamp duty (which it wasn't) but that's about it. A world in which every transaction for sale (houses or otherwise) has to take place in an open market with multiple bidders to avoid suspicion of tax-evasion is not exactly feasible...

[leicestersq]

That may be technically true, but it's not relevant from a tax perspective. Generally speaking, the IR (and CRA in my case) consider an independent valuation by a market professional to be acceptable evidence of value. If I'd sold to my friend at a price outside of the range of the 3 valuations I received, then maybe they'd be interested had the flat been worth enough to attract stamp duty (which it wasn't) but that's about it. A world in which every transaction for sale (houses or otherwise) has to take place in an open market with multiple bidders to avoid suspicion of tax-evasion is not exactly feasible...

Sure, you were no doubt within the rules.

I would argue though, that it is feasible now for every transfer of land or property in the UK to occur on the open market. I bet the land registry could knock something up in no time, and transfer of ownership would happen via that. Something like Ebay, whereby the highest bid takes it during a period of time, the owner being allowed a 'minimum' sale price though.

As for the rules you describe, I can see how to someone unscrupulous, could get a transaction through at a below market price.

Edited August 12, 2011 by leicestersq

[Guest tbatst2000]

I would argue though, that it is feasible now for every transfer of land or property in the UK to occur on the open market. I bet the land registry could knock something up in no time, and transfer of ownership would happen via that. Something like Ebay, whereby the highest bid takes it during a period of time, the owner being allowed a 'minimum' sale price though.

Wouldn't work, the housing market is nowhere near liquid enough and the legal aspects of the transaction are too complex. Transfer of ownership is the easy bit, making sure you haven't bought something with a right of way through the living room is the bit that takes the effort.