Declaring purchase price when buying house from in-laws?

by Readers Question

7:43 AM, 12th May 2016
About 3 years ago

Declaring purchase price when buying house from in-laws?

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Declaring purchase price when buying house from in-laws?

My wife and I are looking to buy my in-laws home as they are looking to downsize. Is it possible to pay them less than their asking price for the house (thus reducing stamp duty) and pay the rest as a cash lump sum?inlaws

If so what would be the tax implications for them in terms of income tax?

Rob



Comments

Neil Patterson

7:49 AM, 12th May 2016
About 3 years ago

Hi Rob,

First of all your solicitor will not let you misinform HMRC of the true purchase price. This is soap on a rope time!

However you could talk to the family solicitor about your in-laws genuinely gifting you part of the property, but this would need to be considered as a whole with a Will, estate and inheritance tax planning as it would become a Potentially Exempt Transfer

stuart edwards

9:17 AM, 12th May 2016
About 3 years ago

There is nothing stopping your in laws gifting part of the purchase price. However stamp duty will be due on the whole amount.

Steve From Leicester

10:22 AM, 12th May 2016
About 3 years ago

Yes it's possible, but its called fraud.

Its no different to paying part of a bill from (say) a builder by cheque and bunging him a brown envelope stuffed full of cash for the balance in order to pay less VAT.

Sorry to be so blunt.

Samuel Raj

11:34 AM, 12th May 2016
About 3 years ago

Wish we could 'self govern' ourselves like the MPs do, for e.g Malcolm Rifkind & Jack Straw accepting Brown Packets (50k) from the Chinese to represent them?! Obviously we elect them to serve us.....

matchmade

12:29 PM, 12th May 2016
About 3 years ago

Reply to the comment left by "Samuel Raj" at "12/05/2016 - 11:34":

Um, I think this could be interpreted as libel. Neither of the MPs mentioned actually received or accepted any money - they were the victims of a sting by a Channel 4 reporter pretending to be from a fictitious Chinese company, a falsehood perpetrated by an unelected public sector employee who is also paid by "us", the general public (Channel 4 is state-owned). Jack Straw apparently receives £60,000 a year for acting on behalf of a commodity firm at the EU, but this is fully declared and taxed. Both MPs were cleared of any wrongdoing by the Parliamentary Commissioner for Standards.

matchmade

12:39 PM, 12th May 2016
About 3 years ago

I agree this sounds like something HMRC would be eager to discourage. However, to play devil's advocate, what is there in tax law to stop the in-laws from giving the whole house to Rob for free, hence no stamp duty would be payable? Rob might then decide a little later that he'd like to mortgage the house, and to gift the in-laws a large amount of money, again with no tax to be paid because it's a gift, not income. Gifts aren't taxable, and can be any size you wish. The size of Rob's cash gift might happen to be quite close to the market value of the house, but that of course would just be a coincidence.

Puzzler

17:54 PM, 12th May 2016
About 3 years ago

No you can't but if your in-laws were to waive the difference (ahead of your wife's inheritance maybe) no SDLT would be payable on that portion.

https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property

However they would have to agree (as well as any siblings your wife has) and you could then get stung for CT (inheritance tax) as it would be a gift.

Don't think there is any income tax implication.

If you want the house, pay the tax.

Daniel 54

20:38 PM, 12th May 2016
About 3 years ago

Reply to the comment left by "Tony Atkins" at "12/05/2016 - 12:39":

HMRC have access to the General Anti Abuse Rule ( GAAR).Amongst other things,this enables them to treat as void linked transactions if they view that the sole or primary purpose of the transactions is to avoid tax.

https://www.gov.uk/government/publications/tax-avoidance-general-anti-abuse-rules

As such,these transactions would be viewed as tax evasion,with the corresponding penalties.Not a route to be going down.

Steve From Leicester

10:21 AM, 13th May 2016
About 3 years ago

Reply to the comment left by "Daniel 54" at "12/05/2016 - 20:38":

Spot on Daniel54. Tony's suggestion would only stand a chance of being accepted by HMRC if Rob and his in-laws are wealthy enough to give each other gifts of houses or tens of thousands of pounds in cash without affecting their "normal standard of living".

Of course Tony did point out that he was only playing Devil's advocate.

Ian Narbeth

11:04 AM, 13th May 2016
About 3 years ago

Rob
I would take professional advice from a solicitor or accountant. You are risking criminal liability. I don't know if a proposal like Tony's will work but you should get proper advice before embarking on a scheme.

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