# House swap, is stamp duty involved ?



## Starsky (2 Apr 2007)

I wish to swap houses with my brother who lives a short distance away. I am upsizing and he is downsizing but overall there is only about €30k in the difference of the values of the houses.

There is mortgages held on both houses. Both are are principal places of residence. Do we need to go the legal route on this or can we just swap ?

Also if we do go that route are we both liable for stamp duty ??

Any help appreciated.

Starsky


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## Vanilla (2 Apr 2007)

There used to be an exemption in stamp duty that you would only be liable on the difference. That's done away with now and it is basically treated as the sale/purchase of two houses. So each of you will be liable for stamp duty on the value of the houses- except that if the houses are in your sole names, then you will qualify for consanguinity relief- halves the normal rate. But if spouses/partners are also on the title then no such relief.


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## Starsky (3 Apr 2007)

Hi Vanilla

Thanks for your help in these matters........

I would be the sole person on my mortgate but brother would have his partner named on their joint mortgage.  So would that mean they would be liable for the full stamp duty rate and I would be liable for Half?

Also would it be the current market value of the houses or the outstanding amounts owed on our mortgages.

We all thought we had come up with a simple and sensible plan but now..............

Cheers

Starsky


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## Vanilla (3 Apr 2007)

The stamp duty would be based on current market value.

If you buy from your brother and his partner you do not qualify for the exemption. Likewise if your brother and his partner buy from you, they do not qualify. The addition of the unrelated party means the exemption or relief does not apply.


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## monkeyboy (3 Apr 2007)

Can one sell property for much less than the price it would possibly get on open market to get around situations like this.

Is it not the vendors business if they sell their own properties at a knock down price for what ever reason?


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## mf1 (3 Apr 2007)

"Can one sell property for much less than the price it would possibly get on open market to get around situations like this."

Yes. You can. But its a fraud on Revenue. Stamp duty is payable on market value not anything else. Stamp duty is on a self assessment basis so even if it gets through Revenue first time, it can still linger and lurk with interest and penalties accruing.  


"Is it not the vendors business if they sell their own properties at a knock down price for what ever reason?"

Yes. Absolutely. BUT CGT / CAT/ Stamp duty may be payable and that will be on market value NOT on actual price. Reason: Revenue know what Tax payers are like and worked this one out a long time ago. 

mf


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## monkeyboy (3 Apr 2007)

mf1 said:


> Yes. Absolutely. BUT CGT / CAT/ Stamp duty may be payable and that will be on market value NOT on actual price. Reason: Revenue know what Tax payers are like and worked this one out a long time ago.
> 
> mf




I can see this being very complex open to greyness, if an individual sold a place for 317 that may have value say 360. 

It has to be measured case by case given the situation that the vendor has to sell asap to close another or just cant make payments and is forced into a lower asking price.
Does the purchaser have to pay stamp on the over 317 rate?

Is CGT still to be declared at the higher rate above for the vendor?

"market value" is a very theoretical term surely and there must be reasponable scope for the scenario above to allow both parties fall into lower category and even scope in slightly larger disparities..........?


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## mf1 (3 Apr 2007)

Bear in mind that of any party involved in property - the Revenue Commissioners are the closest to what is happening on the ground. They see the daily through put of Deeds in Dublin Castle, they probably have more information available to them than even the biggest of Estate Agents. They know what property is fetching. If its very obvious, you'd need to (should) be very careful before deciding to take Revenue on. 

In the end it is self assessment. In a grey area, all the professional can ( should) do is advise. It is for clients to make their own decisions but far too often they need the professional(s) to be involved ( side contracts, cash in envelopes). Most good professionals won't - and remember, if someone  is willing to lie for you, would you not be worried that they would lie to you? 

Amazingly, when and if the *&^% hits the  fan, and, in my experience, it almost invariably does, clients look to the professionals for help. As if their fraud was the professionals fault.     

mf


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## bacchus (3 Apr 2007)

mf1 said:


> Stamp duty is payable on market value not anything else.


 
Say, for instance, a property's market value is €500k, and it sells for €750k. Is stamp duty not charge on the basis of €750k?


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## mf1 (3 Apr 2007)

Market value is what a willing purchaser is willing to pay. In your scenario, the market value of that property is 750K. If another house on the same road sells for only 500K - all above board and no funny business- its market value is 500K. But it would appear odd. It would very likely attract attention. 

Where there is a huge disparity downwards between perceived market value and actual sale price, a client should be advised to carefully document the transaction. So if and when Revenue come calling, the whole transaction stands up to scrutiny.   In your example, it would be e.g. property on the market for a long time, no offers, no relationship between the parties, or perhaps contracts issued and returned unsigned several times at decreasingly lower prices. 

Most conveyancing solicitors / Estate Agents / anyone who reads the property supplement have a fair idea of what market value is. Revenue certainly do. 

mf


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## rgfuller (3 Apr 2007)

Here is a link to the relevant revenue leaflet - if you treat the exchange as a gift to each other.
[broken link removed]

Selling to each other would, I think, be more tax/stamp efficient.


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## bond-007 (3 Apr 2007)

mf1 said:


> "Can one sell property for much less than the price it would possibly get on open market to get around situations like this."
> 
> Yes. You can. But its a fraud on Revenue. Stamp duty is payable on market value not anything else. Stamp duty is on a self assessment basis so even if it gets through Revenue first time, it can still linger and lurk with interest and penalties accruing.
> 
> ...


So a vendor could not colude with the buyer and sell it for 1 euro?


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## monkeyboy (4 Apr 2007)

bond-007 said:


> So a vendor could not colude with the buyer and sell it for 1 euro?



Seems you could but that the stam would be paid on market value....


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