Declaring purchase price when buying house from in-laws?

by Readers Question

7:43 AM, 12th May 2016
About 5 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

Rob Clark

11:39 AM, 13th May 2016
About 5 years ago

Thanks all for your replies. I will of course pay any stamp duty that I'm required. The point of the question really was whether payment might be staggered. If my in laws wanted to sell before I had enough for the full price. Could I buy at say £20K less and then pay that 3/4 months after completion. It seems not. Thanks for everyone's thoughts. Much appreciated.

John Hart

9:30 AM, 14th May 2016
About 5 years ago

Are there creative financing options that could be used such as sale and leaseback if this situation was suitable to both parties? My knowledge on these are poor, but I'm sure others on this forum will know

Nick Pope

13:38 PM, 14th May 2016
About 5 years ago

My interpretation of the rules is that:

1) Stamp Duty is payable on the value of the property, not the purchase price unless the purchase price is higher so they get you either way.

2) Gifts may be tax free. There are limited amounts which relatives (parents, grandparents) can give away without any tax being payable - I think it's £3000 p.a. or a lump sum of around £10,000 otherwise it falls in the potentially exempt rules and they must live for 7 years to escape the tax trap. There is a sliding scale reduction if less than 7 years but I'm not sure of the exact figures.

Puzzler

13:45 PM, 14th May 2016
About 5 years ago

Nick, you are thinking of CGT, not stamp duty which is payable on the consideration i.e. price. Paying in instalments does not get you out of it. If the in-laws were happy to accept a lower price then the SDLT would be lower but you can fall foul of other taxes e.g. IHT.

Michael Barnes

22:19 PM, 14th May 2016
About 5 years ago

Reply to the comment left by "Rob Clark" at "13/05/2016 - 11:39":

I expect that you could pay in instalments, but pay the full SDLT up-front. e.g

Price = £200,000
Pay £170,000 now; pay SDLT on £200,000 now,
Pay £30,000 next year.

This sounds simple enough to run past a HMRC tax inspector and if the answer is "yes", then get her/him to put it in writing to you.

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