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  • Property-a-holics

    Cost of buying and selling on same day?

    It is not uncommon in property circles to hear someone talking about a deal where they exchanged to purchase a property and then managed to sell it for more and complete both the purchase and the sale on the same day.

    I was wondering about the legals and tax implications of this work. In particular whether the government benefits from two payments of SDLT in such situations?

    But I was also trying to think through the conveyancing steps... meaning that while two contracts of sale would be required, I wonder if in fact just one TR1 would be submitted to the land registry (signed by the original owner and transferring direct to the final owner)?

    If you have been involved in such a transaction or understand the process, please do comment. Thanks
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    Bumping this post as there were no replies first time... has anyone done this please? Or helped someone do this please?
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    Very doubtful you could do a back to back today, they went out with big shoulder pads.
    Council of mortgage lenders (cml) guidelines preventing mortgage lending on houses owned by the previous owner for less than 6 months, expensive indemnity claims suffered by solicitors and valuers in the past and an owness on solicitors to confirm everything to the lenders makes this a non starter In my book
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    Thanks Andrew for your reply.

    Knowing this is referred to as "back to back" is helpful as I have now been able to find references to this practice on Google. I've just called HMRC and learned they call it a "sub-sale". A situation where this can arise is if a property is purchased off plan and increases in value prior to completion and is sold on for a higher sum than the original price.

    Yes, interesting, I'd not like to be a conveyancer or surveyor involved in one of these deals!

    And good point re mortgage 6 month rule, though (assuming the final buyer needs a mortgage), and both sales complete on the same day, only one mortgage would be needed (by the final purchaser), as the completion funds would pass down the chain. I am assuming deposits were paid in cash of course.

    The HMRC SDLT helpline say they are unable to answer a query such as this by phone or email... enquiries regarding specific situations should be made by FAX or post only. For the record: Birmingham Stamp Office, 9th Floor, City Centre House, 30 Union Street, Birmingham, B2 4AR. My guess is they do this so they can put the enquirer on their radar!

    OK, knowing the HMRC refer to this as a sub-sale has helped me find the answer.

    In short, the intermediate purchaser, though liable to pay SDLT is usually able to get relief. (But he/she should check the rules and do it correctly)

    for example, B may assign the benefit of its contract to C, or A may transfer the land to B, who immediately transfers it to C. Strictly speaking, each of these transactions could give rise to two SDLT charges. However, this would amount to a double taxation burden and therefore, by virtue of the sub-sale relief rules, B, the middle-man, as it were, is relieved of its obligation to pay SDLT.

    The rules changed in Jul 2013 to attempt to fix previous loopholes where this relief was being abused to evade SDLT. (the situation I describe is valid and acceptable when done for commercial reasons like making a profit.)

    More details here: or Google "SDLT sub-sale"
    https://www.walkermorris.co.uk/so-long-sub-sale-relief
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    Thanks for digging in to this.

    I wonder how Person B would be treated from a capital gains perspective, as they had made money from selling the property?

    Complicated money trails and deal structures like this are a red flag to HMRC imho.
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    Vanessa,

    Yes, sneaky person "B" would pay CGT on his profit less the £11,100 annual allowance. but would keep the remainder.... unless he suffered a CGT loss in the same year. 

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