Jump to content
House Price Crash Forum
Drummer

How to avoid SDLT?

Recommended Posts

Just wondering what measures are in place for people who want to deliberately avoid SDLT?

e.g. An £800k house which I offer you £300k for the house + another £500k for a sofa and some leftover wallpaper?

I know solicitors & EAs are doing this on a smaller scale for slumlords buying houses under the £45k threshold e.g. the house is worth £55k, pay £45k for the house + £10k fee to the EA.

Edited by Drummer

Share this post


Link to post
Share on other sites
10 minutes ago, Drummer said:

Just wondering what measures are in place for people who want to deliberately avoid SDLT?

e.g. An £800k house which I offer you £300k for the house + another £500k for a sofa and some leftover wallpaper?

I know solicitors & EAs are doing this on a smaller scale for slumlords buying houses under the £45k threshold e.g. the house is worth £55k, pay £45k for the house + £10k fee to the EA.

If your a cash buyer possibly, if you want a mortgage then your out of luck as they won't lend a multiple of the purchase price. I am sure that HMG will detect this fraud & issue a fine of 2 times the evaded tax plus interest.

Share this post


Link to post
Share on other sites

Agree that a mortgage is a sticking point in these circumstances! How do HMRC know whether a house is undervalued or not?  Maybe they can trace payments to the vendor around the time of the house sale but that involves investigation work which HMRC probably dont allocate the resources for.

Share this post


Link to post
Share on other sites
7 hours ago, Drummer said:

….but that involves investigation work which HMRC probably dont allocate the resources for.

We have computers and databases now. Obvious malfeasance flashes up red.

On the flip side, with many people selling inherited property into a falling market, it is not widely known that you can claim back overpaid IHT resulting from a property that sold for less than its reported probable value.

 

Share this post


Link to post
Share on other sites
13 hours ago, Drummer said:

Agree that a mortgage is a sticking point in these circumstances! How do HMRC know whether a house is undervalued or not?  Maybe they can trace payments to the vendor around the time of the house sale but that involves investigation work which HMRC probably dont allocate the resources for.

I know in Spain there is a massive issue with tax on purchase price,

 

The Spanish tax man automatically assumes that everyone is under declaring the sold price and that money is going under the table. What the Spanish taxman assumes is that house prices are worth what they where at the height of the bubble, and will tax you accordingly. This results in houses being sold for x (real) and the taxman supertaxing the purchase because they "deem" the property is worth more. 

 

This results in a lot of people preferring to rent than buy, as they don't fall into this trap. There is another issue in which people who own flats built prior to (some certain year in which legislation obliges that elevators are installed), now have a legal obligation to have elevators retro installed if someone within the block requests it (old people). Meaning cheap flats on www.idealista.com that seem cheap could have a massive liability attached. Now I have nothing against the old, but couldn't they just move to a ground floor flat, rather than impose a massive financial burden on the young?

Share this post


Link to post
Share on other sites

Some relatives tried a scheme managed by another relative.  All very clever and well, it was a relative after all!  Ended in tears, well a bill from HRMC!  The're legit ways to mitigate taxes, illegit ways, and an ever shinking grey area where HRMC comes back later and tells you which one it was!

Share this post


Link to post
Share on other sites
5 minutes ago, Finman said:

Some relatives tried a scheme managed by another relative.  All very clever and well, it was a relative after all!  Ended in tears, well a bill from HRMC!  The're legit ways to mitigate taxes, illegit ways, and an ever shinking grey area where HRMC comes back later and tells you which one it was!

Except if you are rich. Then they do one-on-one deals. But yes, don't f*** with the taxman.

Share this post


Link to post
Share on other sites
14 hours ago, Drummer said:

e.g. An £800k house which I offer you £300k for the house + another £500k for a sofa and some leftover wallpaper? 

Such "related" items all go on the solicitor's paperwork precisely for this reason.  And given the risk, the vendor would want such a slice it may not be worth it.  IMHO based on seeing the impact of a few tax investigations on people's health, families, and finances, evading tax is a mugs game.  Avoiding tax though, well that takes smarts and greed control, although some may still have a point and object.

Share this post


Link to post
Share on other sites

old colleague of mine had a HMRC investigation as he purchased the house for 999999 and I think the stamp duty level was 1million for next band, this was a few years ago.

 

apparently the day before exchange the guy wanted to charge him 5k for the carpets and white goods which were already included in the sale. he agreed to pay for them in cash. the vendor on the day of completion asked him to donate the 5k to charity as he was only doing it to push him over the limit!

 

Share this post


Link to post
Share on other sites

There is a maximum amount allowed for fixtures and fittings.  Carpets are not included nor curtains.  So the 2 parties would have to agree something between them. No sensible seller will trust a buyer to hand over for example £50,000 when contracts have been exchanged or completed it is too much of a risk.  #~
Solicitors will not get involved as they would be struck off and off to prison there is nothing in it for them.  

Share this post


Link to post
Share on other sites
On 02/10/2018 at 00:05, Drummer said:

Agree that a mortgage is a sticking point in these circumstances! How do HMRC know whether a house is undervalued or not?  Maybe they can trace payments to the vendor around the time of the house sale but that involves investigation work which HMRC probably dont allocate the resources for.

Big data - probably use interns to check - not the hardest fraud to spot 

Share this post


Link to post
Share on other sites

Like all tax I guess it’s avoidable. A brown paper bag is possible but do you do it before or after exchange? It’s a risk of the buyer/seller not seeing the illegal deal through once parties are committed  

SDLT has usual checks in place and can be detected. 

Solicitors are under an obligation to report wrong doing. Crime and jail time so not so sure it’s wide spread. 

Also the tiers are incremental now so over a certain amount only the amount over the tier attracts the higher rate and not in the whole price.....so less incentive. 

Big avoiders of SDLT set up schemes but the big boys have always avoided tax. GAAR rules have closed these down. Sure loopholes might exist but borderline evasion me thinks. 

Share this post


Link to post
Share on other sites
On 01/10/2018 at 23:45, Drummer said:

Just wondering what measures are in place for people who want to deliberately avoid SDLT?

e.g. An £800k house which I offer you £300k for the house + another £500k for a sofa and some leftover wallpaper?

The tax is due on the market value not the amount changing hands.

Share this post


Link to post
Share on other sites
On 01/10/2018 at 23:45, Drummer said:

Just wondering what measures are in place for people who want to deliberately avoid SDLT?

e.g. An £800k house which I offer you £300k for the house + another £500k for a sofa and some leftover wallpaper?

I know solicitors & EAs are doing this on a smaller scale for slumlords buying houses under the £45k threshold e.g. the house is worth £55k, pay £45k for the house + £10k fee to the EA.

Not to that level they're not. What estate agent charges a £10k fee on a £45k sale?In some instances the buyer has agreed to pay the agreed vendor's fees to the EA. Note these were agreed before said 'fraud' took place. 

Chattels and fixtures and fittings must be at fair value so unless they'e throwing in the hallway clock that was gifted to Louis XVI it ain't worth £300k. 

No straight solicitor would transact that for you. If you are the solicitor acting for yourself then you can't have a mortgage since the conveyancing acts for the lender, not the buyer. If you are a cash buyer at that level and get it through you've committed fraud. The penalty is repayment of the SDLT plus 100% of what you should have paid plus interest, plus more penalties for late payment. 

But you don't need my negativity in your life so go for it and report back :) 

Share this post


Link to post
Share on other sites
On 02/10/2018 at 14:39, hurlerontheditch said:

old colleague of mine had a HMRC investigation as he purchased the house for 999999 and I think the stamp duty level was 1million for next band, this was a few years ago.

 

apparently the day before exchange the guy wanted to charge him 5k for the carpets and white goods which were already included in the sale. he agreed to pay for them in cash. the vendor on the day of completion asked him to donate the 5k to charity as he was only doing it to push him over the limit!

 

I don't recall £1m ever being an SDLT threshold?

Share this post


Link to post
Share on other sites
1 hour ago, hurlerontheditch said:

2012 it was. 4% under 5 % over 

Nearly

1m was 4%, 1,000,001 was 5%

Total tax saving from offering 999,999 instead of 1m = 4p

Share this post


Link to post
Share on other sites
32 minutes ago, hurlerontheditch said:

Incorrect. In 2012 you paid 5% on purchase price. Not the part over the threshold 

But I'm not wrong. 

A purchase price of 1m still attracted sdlt at 4%, the higher rate applied at a purchase price OVER 1M, So 1,000,001 would be 5% on the lot. 1m 4% on the lot. 

The reason i mention this is because the earlier story doesn't make sense. Nobody would offer 999,999 instead of 1m to save 4p. They would offer 1m instead of 1,000,001 to save 10k though. 

Share this post


Link to post
Share on other sites
7 hours ago, adarmo said:

But I'm not wrong. 

A purchase price of 1m still attracted sdlt at 4%, the higher rate applied at a purchase price OVER 1M, So 1,000,001 would be 5% on the lot. 1m 4% on the lot. 

The reason i mention this is because the earlier story doesn't make sense. Nobody would offer 999,999 instead of 1m to save 4p. They would offer 1m instead of 1,000,001 to save 10k though. 

The point was he offered 9999999 and vendor wanted last minute to add another 5k for white goods and carpets.  

Share this post


Link to post
Share on other sites
1 hour ago, hurlerontheditch said:

The point was he offered 9999999 and vendor wanted last minute to add another 5k for white goods and carpets.  

Ok. So provided that was fair value then fine. But sounds like he didn't pay anything for them in the end. 

How did the investigation go?

Share this post


Link to post
Share on other sites

They closed the loophole Mandelson exploited years ago

https://www.telegraph.co.uk/news/uknews/4190318/Taxman-targets-stamp-duty-loophole.html

Quote

In 1999 Peter Mandelson was accused of taking steps to minimise the stamp duty on a flat in Notting Hill, west London. He bought it for just under £250,000 but paid an extra sum for fixtures and fittings, taking the total price to more than £250,000.

He was able to avoid the higher rate stamp duty of 2.5 per cent which then applied to properties costing £250,000 or more.

 

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.