Can I sell a flat top my DC at a discounted price?

[YumYummy]

I own a flat which my DC lives in, does anyone know if i am allowed to sell it to him for lower than market value price?
I bought the flat last year for 200k, it’s worth about 210k now. My DC could get a mortgage for 120k so I was thinking of selling it to him for 140k.
I wanted to know if there would be taxes to pay.

Interesting

First, is everything in England?

Yeah, you can sell it cheap.

But HMRC will tax you stamp duty at market value, not what you value it at. If there's doubt, they'll investigate via local EAs and bill you plus fine for not being honest.

And Mortgage company's value at market valuation, not what you value you it at. Again, they'll make their own assessment either virtually if send out a valuer.

But the mortgage company won't care if you under value it. If they're loaning £120k against £210k it's 57% LTV. So a safe risk for them and should get a more attractive interest rate.

Yes England, I want to down everything above board so wanted to see if this was legal.
I bought the flat last year as my DC was living in an awful house share but haven’t worked out how to pass it on to him. I can’t afford to give it to him as want to help
my two younger DC.

Speak to a solicitor about a gifted deposit instead.

Its up to you how much you sell your property for

I'd check if Capital Gains Tax is due on the sale, as it will look like you are undervaluing the property and you've never lived in it as your main residence.

Yes you'd need to pay capital gains based on the market value price not the lower price you're selling for. The mortgage company will likely treat the under value as a gift, so you'll probably need to sign something to say that it is a gift. Otherwise no reason why you can't choose to sell at whatever price you want. Mortgage company may well be willing to treat the difference in equity as a deposit, so another potential bonus

Let him buy as much of it as he can afford so around 60% if he can get £120k.

Thanks, this is all very helpful particularly the point about the lenders possibly treating the equity as a deposit.
Ideally I’d like him to own it all rather than just some of it as it’s on my mind at the moment.

Maybe just wait and see if the market does suffer a downturn. The issue may just resolve itself.

Yes you can sell your flat under value (you could give it away if you wanted to but you have stated that that is not what you want).

You will owe capital gains on the market value if any is due. In simple terms that is the rise in value between when you bought it and what it is worth now. There are some costs you can deduct such as buying and selling costs and you have an annual exempt amount that you won't need to pay tax on. If the flat is jointly owned for example with your husband you will both have a capital gains tax annual exempt amount. Looks like that capital gains exempt amount is £12,300 so I don't think any will be due on the amounts that you are talking about but you may need to do a form for HMRC so ask your solicitor.

I don't think stamp duty will be an issue as I think properties worth less than 250K are now exempt from stamp duty.

Some lenders won't allow people to buy from family on their mortgages so you need to advise your broker of the situation.

With mortgage rates having just gone up you could sign it over to him with a charge registered against the house for £140K or whatever you want for it (like a private mortgage the charge protects your interests like it does for a mortgage lender) and he can pay you an agreed amount each month. This only really works if you are not in a rush for the money and don't want to charge interest. Interest would be taxable. Keep thorough records that you both sign of repayments if you do this so there is no disagreement in what has been paid back.

You can, but your DS will need to ensure the mortgage lender knows it's a gifted deposit arrangement. He's best going through a mortgage broker as some high street lenders won't give mortgages on that basis. And you will also pay CGT on the market value of the flat. E.g. If market value is £250k and you sell it to him at £150k then you will still pay CGT as if you had sold if for the market value.

Yes. And you can get a Genuine Bargain Price product so they don’t need a deposit (full market value used as the equity). Available (or was) through Nationwide.

Just speak to any property solicitor, it won't be a new situation they've never seen before.

www.nationwide-intermediary.co.uk/lending-criteria/purchase-types

Thanks once again.

You want to speak to a really good independent mortgage advisor!

You are missing the point. Capital gains tax and stamp duty will have to be paid and things need to be fine in a way that doesn't break any tax laws. Under selling in order to reduce stamp duty and CG tax is illegal. The OP is wise to be asking how to best do things

Correct me if I am wrong but Capital gains has an allowance of £12,300. The flat has only increased by £10k so there is no CGT liability.

Stamp duty is paid by the purchaser, currently the rate for properties up to £250 is zero so no stamp duty.

@Princessglittery good points but CGT on property is 18% not 10% and 28% if a higher rate tax payer. Not knowing what other income and investments the OP has, it's hard to say if there would be tax to pay

Of course you can! You own it. You can sell it at whatever price you like.
You'd be an idiot to sell it at a rate that put you in negative equity though.

You should have bought it in joint names initially - makes it easier to hand over without large stamp duty or capital gains tax costs. Too late now though.