Stamp duty question

[Mr Squarekins]

Can anyone explain what happens in term of stamp duty in the following scenario please?

Two parties, agree to swap properties. One is downsizing, the other upsizing.

£100k difference in the properties. £100k would be paid as part of the deal. All normal solicitor legals would be performed.

Does stamp duty work in exactly the same way as if the purchases were not linked in any way?

[mdw]

My parents did this 5 years ago and from memory stamp duty was paid on the full amount just like on a normal sale.

[ARHarh]

It will still be seen as buying the house for market value even if you don't exchange that amount of cash. You are still exchanging that amount of value.

[Mr Squarekins]

My only other thought was. What if both parties agreed lower prices for their properties? E.g instead of £800k I'll give you £200k? No other parties involved, but is that legal? Avoidance rather than evasion?

[Mr Whippy]

Sell the big house for £100,000, the cheap house for £0.

Then charge £500k or whatever for the carpets

[Mr Squarekins]

Mr Whippy said:

Sell the big house for £100,000, the cheap house for £0.

Then charge £500k or whatever for the carpets

I thought it, but didn't want to be the one to say it

[Sheepshanks]

I suppose if there was sufficient trust between the parties then one house could be gifted and the other sold for £100K.

[Mr Squarekins]

Sheepshanks said:

I suppose if there was sufficient trust between the parties then one house could be gifted and the other sold for £100K.

I wouldn't be trying to completely avoid tax. Just reduce it for both parties if it was legal under this circumstances.

Thus agreeing prices at a lower value, not zero for. As long as £100k difference, I see no reason why lower prices cannot be agreed between two parties. But, I'm no lawyer.

[Jobbo]

If you’re exchanging properties then each party pays SDLT based on the market value: https://www.gov.uk/hmrc-internal-manuals/stamp-dut...

[98elise]

ARHarh said:

It will still be seen as buying the house for market value even if you don't exchange that amount of cash. You are still exchanging that amount of value.

This.

A true gift (no money or assets in exchange) doesn’t trigger SDLT, but exchanging houses would as its an asset with value (just like money).

[119]

Reasonably sure undervaluing a property will not go well!

[Mr Squarekins]

Thanks for confirming. I expected as much, but worth asking. Still looking to swap, just now clear on the situation. Thanks.

[TA14]

Mr Squarekins said:

Thanks for confirming. I expected as much, but worth asking. Still looking to swap, just now clear on the situation. Thanks.

For each house, it might be worth getting 7 or 8 RICS valuations and using the most favourable 2 or 3. Depends what the rate of duty is at the values you are considering.

[Mr Whippy]

Having recently moved, you do fill out a big long document about contents.

In theory you could suggest you re taking everything with you (carpets, lights, bulbs, electric fittings, doors, appliances, yadda yadda), and then subtract that from the market value

If you extended that to garden plants it could get quite fun but not sure when Rachel would come knocking for her lost revenue



Combined with the above survey valuations method it could save something… but you’d have to make sure both parties are happy to spend money to hopefully save money!