Purchasing Family Home

I have a scenario which i was wondering if anyone has come across or if there is somthing I am missing.

My parents are going to sell there house and build next door, they have obtained planning permission. I am looking into buying it and we are thinking of the following

1) House worth around 850k
2) Parents said they will sell for 800k to a family member
3) will finance this by paying them 700k now and 100k in the future 7-8 years
4) Planning on paying the stamp duty on 635k at 3.7% (Family Relief) and having a seperate contents agreement for the other 65k (Total 700k).

My questions are
1) What proof will I need to to get stamp duty on the 635k. We are palnning to take a mortage of 570k and pay cash of 130k (From sale of our existing house).
2) Would it be better for the parents to say they are giving me a gift of 440k of the house and the rest will be paid in cash, hense stamp duty will be on €800-440 = 360k.
3) is there anything else I should consider, apart from CAT in relation to the 100k in 7-8 years.

Any opinions would be greatly appreciated

You're in a taxation minefield here. First of all, you're looking at a transaction value which will bring you over the 9% threshold (4.5% with consanguinuity relief) and no solicitor in his right mind will sign off on it as a sub-threshold transaction because they are required to certify that this does not form part of a transaction or series of transactions of greater value; secondly, there may be further tax implications (subject to gift issues, etc) in purchasing the house below market value; thirdly, depending on how the payments are structured, there may be income tax implications for your parents on the balance of the monies.

My non-expert view is that the purchase structure you propose could constitute illegal tax evasion, and will leave both you and your parents in a vulnerable position.

You need sound professional advice about this, or you may all be very financially and legally exposed.

Thanks Dreamer for your observations.

Then what about this

1) Say the market value of 750k on the house is got as is legitimate
2) Parents gift the land value of 150k to me
3) I pay them 600k for the value of the house now
4) I pay them 50k for the contents contract

As stamp duty is only paid on the consideration then i would only pay 3.75% of 600k.

Does this sound better, I am trying to figure out the best tax avoidance way of doing the transaction and not evasion!

From my parents point of view I will pay them 650k now and in 10 years on an unrelated matter would gift them each 49k (within CAT)

Dreamerb has really told you the problems you have here. In reality, you know the house is worth 850K. Stamp duty is payable by a purchaser on the market value ( 850K) NOT on any other deemed/wannabe value.

Contents contract is a non starter - it is obviously not a real situation - even where contents come into it Revenue will not readily accept a contents situation of much more than max 10K - if that.

To avail of the consanguinity relief you will need to have the Deed adjudicated and Revenue will require a reputable valuer to furnish a valuation for the property. Go in with a dodgy makey uppy valuation from a "makey uppy auctioneer" and your feet will not touch the floor for Revenue going through you for a short cut. Most valuers will not touch a low valuation situation. Their neck is on the line.

1) Say the market value of 750k on the house is got as is legitimate
Its not.

2) Parents gift the land value of 150k to me
Its a scheme, part of a series of transactions, won't wash.

3) I pay them 600k for the value of the house now
No problem with this.

4) I pay them 50k for the contents contract
Won't wash.

As stamp duty is only paid on the consideration then i would only pay 3.75% of 600k.

As above, duty is paid on value ( 850K)

From my parents point of view I will pay them 650k now and in 10 years on an unrelated matter would gift them each 49k (within CAT)
Well you could do this but then on the face of it - they are gifting you 200K now- unless they have a protection by way of a legal agreement, you may not pay the balance. And since the purpose of the legal agreement is to avoid tax, it won't wash either.

Finally, as you will be getting a mortgage, your lender will want to make darned sure this is all done above board so that they have recourse if you default so they will tie you and your solicitors in a knot of compliance issues.

Why not just pay the half rate stamp duty? Thats a great deal.


mf