House stamp duty question

Stamp Duty Land Tax is based on the market value of each of the properties

I think you mean that Mr A and Mr B could easily *lie* about the market values (not depress them). That would not avoid SDLT. It would evade it and rather blatantly. With SDLT HMRC do now have a compliance programme. I don't know if they have yet had a criminal prosecution in connection with SDLT but someone has to be first.

However "market" value is based on what people are prepared to pay for something. If these two parties agree that their houses are worth a certain amount then surely this becomes the market value. ;-)

Ah, a Humpty Dumpty definition of market value - to which HMRC officials (at least those of the old school) might be happy to say "when shall we see you in court then?" :))

I think you might just have to widen it to a larger range of offers before establishing market value on that basis.

Whether the houses have or have not a mortgage is not relevant and does not alter their values, albeit it will alter the equity that the owner has.

Rob Graham

Ah, no true, but a mortgage will have a valuation attached to it thereby giving each house a "value".

Maybe, but when was the valuation done? How long ago was the mortgage set up?

Rob

"Mark" wrote

If they had "agreed" it was worth 1, I might come along and offer 2. So the "market value" would then be at least 2. But someone might come along and out-bid my 2...

A good way of establishing a "fair" market value might be to enter the properties into an auction. Be sure to set an insanely high reserve price to make sure they don't actually sell. The level at which the bidding stops will be the market value.

Not necessary. There would be no way of telling whether any of the bidders were actually able to buy the house or not.

Ummm - not necessarily for SDLT purposes. The case law on "market value" made my head hurt but there is a relatively painless summary at

a.. the sale is a hypothetical sale b.. the vendor is a hypothetical, prudent and willing party to the transaction c.. the purchaser is a hypothetical, prudent and willing party to the transaction (unless considered a 'special purchaser') d.. for the purposes of the hypothetical sale, the vendor would divide the property to be valued into whatever natural lots would achieve the best overall price (this is the principle of 'prudent lotting') e.. all preliminary arrangements necessary for the sale to take place have been carried out prior to the valuation date f.. the property is offered for sale on the open market by whichever method of sale will achieve the best price g.. there is adequate publicity or advertisement before the sale takes place so that it is brought to the attention of all likely purchasers h.. the valuation should reflect the bid of any 'special purchaser' in the market (provided they are willing and able to purchase)" So if the property is entered into an auction where no willing buyer is likely to attend, or it is a property which usually commands a better price by other methods, ......