Vendor gifted deposit legalities?

Question

Question : Vendor Gifted Deposit Transfer Figure?
Question Details: If buying a property for £100,000 -to include a 10% vendor gifted deposit (so borrowing 90,000), what is the transfer figure for exchange of contracts?

My solicitor says 100,000 for tax and land registry purposes

Sellers solicitors says it has to be the net figure... I understand this to be incorrect as the property is valued at 100k with the mortgage lender, and they are lending 90% loan to value, so it will go through as being sold for 100k with land registry..

the sellers solicitors seems to think this is wrong..not sure if they are just suspecting mortgage fraud due to the size of "deposit"... one of her points being her clients liability for capital gains...well to my knowledge you pay capital gains on profit, not on gross income, the 10% seller gifted deposit can be put down as an expense against the figure of 100,000

Can anyone shed any light on the matter please?

Thanks Steve, not sure it makes any difference..but the seller does not get the 10k back.. he clears 90k, (the agreed sale price) but it is put through at 100k with deposit for lower int. rate

Answer 1

As I undersatnd it there are 2 transactions taking place here :-

1) The vendor is giving you £10,000 (thank you)

2) You are using this £10,000 as a deposit on a £100,000 house

The fact that the vendor gets the £10,000 back as part of the £100,000 you pay for the house will have no effect on the 'value' of the house, which is what you paid for it, i.e. £100,000.

The vendrors liability for Capital Gains etc. is none of your concern, however it is not possible to reduce Captial Gains by 'giving away' part of the proceeds of the house sale 'in advance' (which is what they seem to be trying to do).

If (for example) a friend gives me £200,000 and I then use this to purchase their £200,000 investment property this does NOT eliminate the Capital Gains Tax that my friend has to pay on the sale of the £200,000 property (nice try :-) )