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Original poster

Legal implications of trying to dodge stamp duty?

33 replies

Namenotfound · 30/05/2023 13:10

Name changed as I appreciate this is morally dodgy. I’m interested in the legal position.

I am looking to upsize at the same time as my mum is looking to downsize to a flat; she has very generously offered to sell me her house (worth probably £850k) for whatever I can sell mine for (probably around £650k), on the proviso that she wouldn’t be expected to get the house ready for sale, could leave furniture behind and that sort of thing.

As far as I can tell, it is perfectly legal for her to gift me the house and have the deeds signed over to me. Equally, as far as I can tell, I am legally able to gift as much money as I want to a family member.

Is there any reason she couldn’t just gift me the house, and I couldn’t just gift her £650k once the sale of my house had been completed, saving ~£20k of stamp duty?

I know if either of us died within the next 7 years the gifts would form part of our estates for IHT purposes, which is fair enough but on balance seems unlikely. We are both in good health and most of the women in our family have lived well into their 90s.

Equally, I know this may be considered deprivation of assets if she needed care later, but I don’t think we would be relying on local authority funding for care anyway. My mum has an excellent DB pension, lots of savings, and I would be able to top up any difference.

I know to some considering this will be morally reprehensible which is fair enough really, still would be grateful for any advice.

OP posts:
WednesdaysPlaits · 30/05/2023 13:14

Is there a mortgage on the property?

nosunshinewhenshesgone · 30/05/2023 13:14

Does your mum own her property outright, or does she have a mortgage?

ANewAdventure · 30/05/2023 13:14

I believe that being gifted a house still comes with stamp duty obligations, presumably to address this precise situation!

Also look at capital gains tax implications for when you sell it.

And will you be taking a mortgage out on it?

Original poster
Namenotfound · 30/05/2023 13:16

Mortgage was paid off about 25 years ago!

OP posts:
Throwncrumbs · 30/05/2023 13:16

Do you have siblings?

HermioneWeasley · 30/05/2023 13:16

AFAIK stamp duty is a tax on documents, so to have the house signed over to you I think you’d still have to pay?

Original poster
Namenotfound · 30/05/2023 13:16

Throwncrumbs · 30/05/2023 13:16

Do you have siblings?

Nope, only child here

OP posts:
VeggieSalsa · 30/05/2023 13:18

If it was found out, you’d have to pay the SDLT, interest and potentially penalties.

You might find a solicitor is uncomfortable in completing a SDLT return on this basis.

There are rules in place to stop you doing this, and so you would be fraudulently saying no SDLT is due but there would only be financial consequences, and only if it was found out.

PickledPurplePickle · 30/05/2023 13:19

Well your Mum would need a deed of gift to say that she was transferring it to you as a gift

Is she willing to lie on a legal form?

PickledPurplePickle · 30/05/2023 13:20

Also if a solicitor gets wind of you trying to do this they would have an obligation to report you

gogohmm · 30/05/2023 13:21

If you get property as a gift you'll not pay Stamp Duty Land Tax as long as there's no outstanding mortgage on it. You'll pay Stamp Duty Land Tax if you take over some or all of an existing mortgage and the value of the mortgage is over the Stamp Duty Land Tax threshold.

Original poster
Namenotfound · 30/05/2023 13:21

VeggieSalsa · 30/05/2023 13:18

If it was found out, you’d have to pay the SDLT, interest and potentially penalties.

You might find a solicitor is uncomfortable in completing a SDLT return on this basis.

There are rules in place to stop you doing this, and so you would be fraudulently saying no SDLT is due but there would only be financial consequences, and only if it was found out.

If this is the case I would happily do it as a normal sale. I’m trying to work out if there is anything actually not legal about the situation I’ve proposed. If it’s not technically above board I wouldn’t do it.

For everyone saying Stamp Duty would still be payable on a gifted property, I should look more closely into that, the first result I found on Google said it wouldn’t be but that’s probably not enough to go on!

OP posts:
Original poster
Namenotfound · 30/05/2023 13:22

PickledPurplePickle · 30/05/2023 13:19

Well your Mum would need a deed of gift to say that she was transferring it to you as a gift

Is she willing to lie on a legal form?

Is it a lie though? If a gift from her to me is legal and a gift from me to her is legal?

OP posts:
PickledPurplePickle · 30/05/2023 13:23

It's not a gift though is it, you are paying for it, albeit a reduced price - so yes it's not legal and would be fraud

Doggymummar · 30/05/2023 13:25

This exact scenario was in the guardian money pages this weekend. Basically the advice was to do it as a normal sale transaction or see a solicitor to get agreements drawn up as there are inheritance tax implications in case of death. You should find it online easy enough

YukoandHiro · 30/05/2023 13:25

HermioneWeasley · 30/05/2023 13:16

AFAIK stamp duty is a tax on documents, so to have the house signed over to you I think you’d still have to pay?

This is right - at the transfer of ownership you have to pay stamp duty. So you can't dodge. Unless you're able to put it into some kind of offshore trust I guess, but doubt you have access to that.

caringcarer · 30/05/2023 13:29

OP we are currently selling DS one of our btl properties at £60 under value so he can get on the property ladder. We still have to pay CGT on full market value. It always best to be honest.

newtb · 30/05/2023 13:32

Think itbused to be the case that you paid stamp duty on the difference, but that was changed in the 80s due to a massive number of house swap deals, as the treasury was losing out.

VeggieSalsa · 30/05/2023 13:32

There’s lots of incorrect advice here.

SDLT is not payable on a gift between individuals with no mortgages.

However, this isn’t truly a gift and so you are fraudulently misrepresenting the transaction. HMRC would see all the gifts as one set of arrangements and charge stamp duty accordingly.

If these were legitimate separate transactions and unconnected gifts then there would be no SDLT payable. The question is whether you can honestly say this is the case.

Original poster
Namenotfound · 30/05/2023 13:33

For context, this was the source I initially found which made me think SDLT would not be payable:

“What costs are involved?
There is no Stamp Duty Land Tax (SDLT) to pay when you transfer a property to children unless you are also transferring a loan with the property. If this is the case, SDLT is payable on the value of the loan. There will be legal and administrative costs involved in transferring the title.”

I’m not intending to be dishonest with our solicitors or anyone else, only to find out if this is legally possible. Thanks for the input so far, I assume we will just sell and buy as normal and take solace in at least saving one lot of estate agency fees.

Can I gift property to my children as part of my Inheritance Tax planning strategy?

Gifting UK property to children is a useful way to reduce Inheritance Tax legally. There are many advantages, particularly in terms of Inheritance Tax planning. But there are also disadvantages which you should consider. Read our this advice clinic blo...

https://www.benhams.com/news/property-advice/can-i-gift-my-property-to-my-children-as-part-of-my-inheritance-tax-planning-strategy/#:~:text=What%20costs%20are%20involved%3F,involved%20in%20transferring%20the%20title.

OP posts:
Q2C4 · 30/05/2023 13:35

Doggymummar · 30/05/2023 13:25

This exact scenario was in the guardian money pages this weekend. Basically the advice was to do it as a normal sale transaction or see a solicitor to get agreements drawn up as there are inheritance tax implications in case of death. You should find it online easy enough

https://www.theguardian.com/money/2023/may/29/home-swap-stamp-duty-inheritance-tax?CMP=ShareiOSAppp_Other

Original poster
Namenotfound · 30/05/2023 13:36

VeggieSalsa · 30/05/2023 13:32

There’s lots of incorrect advice here.

SDLT is not payable on a gift between individuals with no mortgages.

However, this isn’t truly a gift and so you are fraudulently misrepresenting the transaction. HMRC would see all the gifts as one set of arrangements and charge stamp duty accordingly.

If these were legitimate separate transactions and unconnected gifts then there would be no SDLT payable. The question is whether you can honestly say this is the case.

Thanks @VeggieSalsa - if it would be considered fraudulent we will just pay it of course. Just wanted to work out if that would be the case or not as everything I found suggested two separate gifts would be legal.

Looks like I’m not dodging this one!

OP posts:
nosunshinewhenshesgone · 30/05/2023 13:41

Namenotfound · 30/05/2023 13:16

Mortgage was paid off about 25 years ago!

Some of the comments on this thread are daft. OP - treat them with caution. For that matter, treat my post with caution, as you have no idea if I'm also a layperson making up random laws to suit my political beliefs. 🙄

SDLT is paid on the chargeable consideration. Usually, an outstanding mortgage catches you out because you're taking on the liability for that debt, which is considered chargeable consideration, even though no money is changing hands.

Your mum could gift you her property with its value of £850k. As you say, if she survived seven years, there wouldn't be any IHT implications on that gift. Please note, though, as @VeggieSalsa correctly points out, there is a massive difference between an actual outright gift and a sale with deferred consideration (i.e. where you pay over the cash at a later date).

If a true gift... your mum would be down an asset of £850k. This could cause issues if she needed the £850k. Her circumstances could change.

Your subsequent £650k would be a gift to your mum rather than a contractual obligation. What would happen if 1) you couldn't sell your property, 2) you fell out with her mum, or 3) you died?

You and your mum may be happy that 1) and 2) are low-risk. You should make sure you have a will in place to protect her from 3), but given your house is worth £650k, as a ballpark, she would only get, say, £520k less legal fees. That then becomes a hit of £330k from the original value of £850k. There could also be a long wait before the estate paid out, and she would not only be getting a reduced sum but there would be that timing disadvantage.

This feels like a really risky transaction for your mum.

If she simply sold her property to you for £650k, yes, there would be SDLT of £20k that you'd have to pay, and she'd only get £630k (your net proceeds), but she would be much safer. It would also be much less hassle for everyone.

I suppose you could take out extra life insurance on yourself with your mum as the beneficiary, so if you died whilst this debacle was going on, she wouldn't massively lose out on the sales proceeds.

It does feel like a lot of hassle just to protect £20k, though. I know £20k seems like a lot, but when you factor in paying for the legal and tax advice you should get before entering into this transaction and consider the hassle and risk (which will especially affect your mum)... I'm not sure this is the brilliant idea you thought it was.

Original poster
Namenotfound · 30/05/2023 13:44

nosunshinewhenshesgone · 30/05/2023 13:41

Some of the comments on this thread are daft. OP - treat them with caution. For that matter, treat my post with caution, as you have no idea if I'm also a layperson making up random laws to suit my political beliefs. 🙄

SDLT is paid on the chargeable consideration. Usually, an outstanding mortgage catches you out because you're taking on the liability for that debt, which is considered chargeable consideration, even though no money is changing hands.

Your mum could gift you her property with its value of £850k. As you say, if she survived seven years, there wouldn't be any IHT implications on that gift. Please note, though, as @VeggieSalsa correctly points out, there is a massive difference between an actual outright gift and a sale with deferred consideration (i.e. where you pay over the cash at a later date).

If a true gift... your mum would be down an asset of £850k. This could cause issues if she needed the £850k. Her circumstances could change.

Your subsequent £650k would be a gift to your mum rather than a contractual obligation. What would happen if 1) you couldn't sell your property, 2) you fell out with her mum, or 3) you died?

You and your mum may be happy that 1) and 2) are low-risk. You should make sure you have a will in place to protect her from 3), but given your house is worth £650k, as a ballpark, she would only get, say, £520k less legal fees. That then becomes a hit of £330k from the original value of £850k. There could also be a long wait before the estate paid out, and she would not only be getting a reduced sum but there would be that timing disadvantage.

This feels like a really risky transaction for your mum.

If she simply sold her property to you for £650k, yes, there would be SDLT of £20k that you'd have to pay, and she'd only get £630k (your net proceeds), but she would be much safer. It would also be much less hassle for everyone.

I suppose you could take out extra life insurance on yourself with your mum as the beneficiary, so if you died whilst this debacle was going on, she wouldn't massively lose out on the sales proceeds.

It does feel like a lot of hassle just to protect £20k, though. I know £20k seems like a lot, but when you factor in paying for the legal and tax advice you should get before entering into this transaction and consider the hassle and risk (which will especially affect your mum)... I'm not sure this is the brilliant idea you thought it was.

Show quote history

Thank you! I appreciate the time and effort you’ve put into this post.

I wouldn’t want to put my mum at risk at all, so will consider this a non-starter.

OP posts: