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Original poster

help! want to buy house - helping owner avoid capital gains by paying cash on top??

16 replies

RanToTheHills · 10/10/2006 09:14

is this legal?
Had offer accepted on house but now current owner has been advised that she'd be liable to large sum in capital gains if they sell at agreed price. They may probably pull out now and rent it instead. We want this house! We're wondering what (legal) ways we can get round this -can we make them a cash payment on top while officially paying them a lower amount (IFYKWIM?)
Hope this makes sense!

OP posts:
TutterIckOrTreat · 10/10/2006 09:17

you can agree to pay an additional amount to cover fixtures and fittings - e.g. carpets, appliances. this should be 'reasonable' and i'm sure your solicitor could advise as to whether it would be acceptable. i'm not sure how it's policed though - random checks by the inland revenue i wonder?

Original poster
RanToTheHills · 10/10/2006 09:19

thx - so can you pay vastly over the odds for fixtures & fittings? there's hardly anything there - couple of white good, carpets, that's it. But we're talking a sum of c. £15-£35k, depending on advice from her accountant.

OP posts:
FredBassett · 10/10/2006 09:19

Are they sure they will have to pay tax on the profit? I thought that was only if it wasn't their main residence.

3sEnough · 10/10/2006 09:20

Hi - fairly certain that CG tax is a percentage of price and not fixed in bands depending upon house price. The owner has probably just found out that if used as an investment property, CG tax kicks in especially if not owned for long (it decreases if you've owned for a long time) If you offer to pay in 'cash' on top she is guilty of tax evasion - not worth the fine/jail sentence!! Not sure if you would be culpable as well but the estate agent should be able to advise you (and scarper fast before they are implicated too!)

Original poster
RanToTheHills · 10/10/2006 09:23

agent not sure and it's not her main residence (don't think she's ever lived there). So is there any alternative? - fixtures & fittings payment? her taking out a mortgage so can offset the profit made? we really want this house!

OP posts:
Original poster
RanToTheHills · 10/10/2006 09:27

bump? (desperate clutching at straws for any way round this!)

OP posts:
Philomena · 10/10/2006 09:44

My only concern over things like this is that if someone is prepared to lie to evade tax how likely is it that they'll stick to their word right through the house purchase? Will they pull out at the last minute, for example, because they've found a better deal?

But then I don't trust anyone during house purchases.

TheBlonde · 10/10/2006 09:46

the seller sounds like a fool - how did they not know this already

Original poster
RanToTheHills · 10/10/2006 09:46

i know, you're right. Really on tenterhooks here! How the rich get rich (and stay so, I suppose)

OP posts:
alison222 · 10/10/2006 09:52

If the seller is re-investing the money in another property and this is not going to be lived in by her I think that she can claim something called rollover releif and any gain made is deferred until that prperty is disposed of.
I think that you can be in trouble for helping someone avoid tax. This suggestion for fixtures and fittings is one usually for you to escape stamp duty and the Inland Revenue have cracked down hard on this and you could find yourself investigated -
Personally I woldn't contemplate it.
If you seller has an investment it is up to her accountant to legally mimimise her tax bill.

Original poster
RanToTheHills · 10/10/2006 09:54

thx. I know what you're saying = she's liable, she's responsible, it's just that we want to persuade her to continue with house sale instead of renting it out again.

OP posts:
alison222 · 10/10/2006 09:59

I know what you mean, but moving is hassle enought without being potentially had up for defrauding the revenue too.
If she is going to sell it she will and if not she won't there is nothing you can do. If you offered cash - what is to say she wouldn't up the stakes further at the last minute.
Find another house hard though that sounds its probably better in the long run

UCM · 10/10/2006 10:35

If you rent the house from her initially then buy it whilst you are renting, the price could then be agreed by yourselves (not the market price). Could you do it that way. Taking rent you have paid off of the cash sum. Bit like buying house from council IUKWIM

booge · 10/10/2006 10:39

When we were buying and looking to get something under the increased stamp duty threshold the agent advised us that the law had been update so that you could only pay market value for fixtures and fittings and that should be 2nd hand market value. Also that the IR do make checks.

LIZS · 10/10/2006 10:44

Perhaps you could agree to part fund her CGT liability with a retrospective cash payment on completion but she (and any partner) would have allowances to offset it against so you need to be very careful in your calculations and maintaining a market value for the house. Agree with The Blonde she sounds daft for not having been aware of this before and I'd be very wary of dealing with her in an attempt to avoid it as there could be a back lash. Your solicitor may be able to advise or refer you for advice at to how legitimately to minimise her liabilty but tbh it is her problem not yours.

UCM · 10/10/2006 10:46

I heard somewhere that if you are already living in the house, it's not quite as stringent, could be wrong though.

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