Under Declaring the Purchase Price
Almost every time a buyer commits himself to buying a property, he is confronted with the request from the seller to declare the purchase price lower on the Final Deed than has actually been agreed.
In years bygone this was a normal request and nearly everyone did it as a method of evading paying tax on the full profit made for the seller and on purchase tax (IMT) for the buyer.
Many foreigners in those years agreed to doing this, and are finding now, that when they sell, they are having to pay the tax over the undeclared portion they paid |"under the table when they purchased
The sellers argument is always that the buyer will benefit by paying less purchase tax as well as less future Council taxes. This is true, but the real motive is out of self-interest in saving on the much higher capital gains tax, which ultimately the buyer will land up paying should he ever resell!
If one was never going to sell, both parties would indeed benefit, but it would remain illegal and punishable by law, if ever discovered.
Another reason to think twice about being tempted into doing this is that the neighbours always have first preference to buy a property for the same price as offered/agreed upon by an outside buyer.
The seller or his lawyer should in fact, send a registered letter to the neighbours before completion, advising them of the deal and price and asking the whether they wish to exert their right of preference and desire to buy. They then have 8 days in which to reply, and if they default, it is assumed they do not want it and one is safe.
Often however this step is omitted, or forgotten, and the purchase completed. If this has happened, a neighbour still has the right for up to 6 months to stake his claim and buy it back for the declared price ! It is thus obvious, that if one has undeclared, one HAS to sell it to him for that LOWER price. There is no come back as it was an illegal procedure, and thus one has to accept losing the difference.
It has been rumoured that on occasion this has been done as a planned and deliberate deception, thus caution is advised !
Save 100s GBP on your Currency Exchange
Save 100s GBP on your Currency Exchange