Excessive valuation on Contents

Hi

I have recently agreed a price of 76k on a house coming fully furnished.

I paid the deposit, appointed a solicitor to the EA. All looked smooth until i got an email saying the vendor wants 2 contracts, 1 for the house at 60k and 1 for the contents at 16k.

Now bear in mind the contents there might be worth 4-5k max.

Needless say it has put a big damper on it. The seller is not in negative equity so my only assumption is avoiding tax and/or hiding from the taxman.

Now the property was advertised at 75k fully furnished, no mention of 2 contracts or excessively over valuing the contents.

My issue now is if i decide to sell the property down the road i will foot the CGT bill that he has avoided.

Is this common? How would you approach this?

ps we are keen on the house but i am not impressed by this curveball.

Waesfjord

I remember this type of tax dodge normally worked back in the crazy days of the celtic tiger the other way around to reduce the house price to reduce the stamp duty due, before stamp duty reforms. I wonder what tax the seller must have to pay - inheritance tax maybe?

Bottom line, sounds dodgy out, if not clearly called out during sale process. Your solicitor is best to give you advice on this.

yeah i am well aware its some sort of tax dodge, just really frustrating as myself and my partner had taken a liking to it for holidays. 1 part of me is saying just go with it, other part is saying not a hope as it pushes the tax on me further down the road.

I will be getting solicitor advice on it. Besides it being totally unethical, is it legal to suggest such a thing

4ensic15

Your problem is that if you get a loan the bank will only value the house at 60k and your maximum mortgage will be a percentage of that. If you don't need a loan and intend to live in the house you can just stamp the 2 transfers together.

4ensic15

4ensic15 wrote: »

Your problem is that if you get a loan the bank will only value the house at 60k and your maximum mortgage will be a percentage of that. If you don't need a loan and intend to live in the house you can just stamp the 2 transfers together.

Paying cash, we intend using it as a holiday house.

How do you mean stamp the 2 transfers together?

jeamimus

He's trying to shift €3000-4000 CGT onto you. At a minimum you can ask for a reduction of that amount.

On the other hand they guy is clearly a messer. Sometimes youre better off not dealing with them at all.

drunkmonkey

House is still costing you what it always was, I get what your saying about the cgt but can't you do the same when your selling it. I'm sure that antique furniture is only going to appreciate anyway.
Don't do what I done, refuse to buy the furniture, lucky they left the toilet behind.
Balls in your court anyway, you can refuse to buy as your worried about tax in the future if you sell and want invoice for the whole house. This might be more the estate agents doing than the sellers.

drunkmonkey

drunkmonkey wrote: »

House is still costing you what it always was, I get what your saying about the cgt but can't you do the same when your selling it. I'm sure that antique furniture is only going to appreciate anyway.
Don't do what I done, refuse to buy the furniture, lucky they left the toilet behind.
Balls in your court anyway, you can refuse to buy as your worried about tax in the future if you sell and want invoice for the whole house. This might be more the estate agents doing than the sellers.

Why would an estate agent suggest this?

I want to buy with the furniture but the valuation is beyond excessive

drunkmonkey

Deleted User wrote: »

Why would an estate agent suggest this?

I want to buy with the furniture but the valuation is beyond excessive

You don't know what way he's getting paid, 1-3% of sale price wouldn't be worth much to him. However 20% of furniture value might be.
Can you buy without furniture?

4ensic15

Deleted User wrote: »

Paying cash, we intend using it as a holiday house.

How do you mean stamp the 2 transfers together?

All instruments in the transaction should be stamped as one. Some people try to save stamp duty by only stamping the house one. For CGT purposes when you sell your gain will be calculated on the 60k. So if you bought for 70 and sold for 100 your gain is 30k. If you buy for 60k and sell for 100k your gain is 40k meaning you are taxed on 10k more than you should be. The only way to avoid it is to try and do the same when you are selling. (0k on contract and 10k contents. The risk is that the Revenue find out and do you for tax evasion and that you won't find a purchaser to agree.
Unless you have hot undeclared cash that you want rid of there is nothing in the 16k contents proposal for you and you risk being investigated by the Revenue and done for conspiracy to evade tax.

drunkmonkey

I'd assume the revenue will never know about the contents invoice. I'd say the risk is very small.

Well the seller wants 2 contracts drawn up, one for the house and one for the contents. All this would go through a solicitor so would a solicitor even agree to go along with such a transaction?

I would much prefer to proceed as the advert stated, house for sale fully furnished at 75k, which was agreed at 76k. Its a place we are keen to buy and now this has thrown a spanner in the works

Well the seller wants 2 contracts drawn up, one for the house and one for the contents. All this would go through a solicitor so would a solicitor even agree to go along with such a transaction?

I would much prefer to proceed as the advert stated, house for sale fully furnished at 75k, which was agreed at 76k. Its a place we are keen to buy and now this has thrown a spanner in the works

newacc2015

Deleted User wrote: »

Well the seller wants 2 contracts drawn up, one for the house and one for the contents. All this would go through a solicitor so would a solicitor even agree to go along with such a transaction?

I would much prefer to proceed as the advert stated, house for sale fully furnished at 75k, which was agreed at 76k. Its a place we are keen to buy and now this has thrown a spanner in the works

Solicitors used to tell buyers to do this all the time when stamp duty had levels. I seen people buying contents for €30-40k. So the buyer could go down a band on the old stamp duty. Sellers generally didnt care about it, as they were paying CGT as it was their PPR.

Give him a counteroffer. Tell him you will meet him halfway. ie house at 68-70k and contents at 5-7k. You said yourself that you like the house and the furniture is worth keeping. If doesnt accept, walk away.

If he is pulling this now. Have you gotten a surveyors report to make sure the house is sound?

4ensic15

drunkmonkey wrote: »

I'd assume the revenue will never know about the contents invoice. I'd say the risk is very small.

People have been caught doing this. If they think the price is suspiciously low they will check out the valuation. The have the right to inspect bank accounts. What if the seller is asked to explain where the 16k which appeared in his bank account came from? What if they discover that he sold a house the same week?
I know a man who sold a house. The Revenue got suspicious and discoverd that the buyer had withdrawn 100k from his bank account on a particular day, which was the same day the house sale closed. the seller meanwhile had lodged 100k on the same day.

jeamimus

drunkmonkey wrote: »

I'd assume the revenue will never know about the contents invoice. I'd say the risk is very small.

You are taking on a risk that you shouldnt have to. You are gaining nothing out of this.
In addition you have an extra GCT tax liability for sometime in the future (10k at whatever rate applies when you sell).