What would be the tax consequences for any of the parties?
Question We are looking to buy our next property but the current property, which we bought using a ‘Help To Buy’ equity loan, is not having many viewings. To help us, our in-laws have offered to buy the property with cash at the original purchase price so that we can be chain-free and not incur the second home stamp duty land tax (SDLT) supplement (as there is a very real chance of completing on the next property before we have sold this one). Is it legal to sell the property to them at the original purchase price or even at a lower price and are there any tax consequences for any of the parties?
Arthur Weller replies:
It is certainly legal to sell the property to them at the original purchase price, or even at a lower price, but for capital gains tax purposes it is deemed that you are selling to them at today's market value. See www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14530. This should not cause you a problem, because I would imagine that any capital gain you incur by this sale is covered by principal private residence relief (PPR). However, I would suggest you think twice about this arrangement because your in-laws will have to pay SDLT on the purchase of the house from you, based on the amount they actually pay you. Furthermore, according to the new rules, if you only sell your current main residence after purchase of a new main residence, as long as it is within three years, you can get a refund of the extra 3% SDLT. See www.gov.uk/government/uploads/system/uploads/attachment_data/file/508272/GuidanceNote_Final.pdf, at section 3.25.
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