I'm selling my house in Bristol, and I wanted to buy the house (also in Bristol) that my buyers were selling (i.e., a house swap). I invited them to offer the minimum price that my ex-husband would accept for selling our house, so long as the same amount came off their house that I would be buying. Unfortunately, my buyers pulled out as they were worried we were on shaky ground for ‘tax evasion’. Is this correct? Is it possible to reduce the value of your house and sell without being threatened with jail? Where is the limit? How is tax evasion, in this case, defined? What is the boundary? 

Arthur Weller replies: 

You are allowed to sell your house for whatever amount you want. There is no tax evasion in doing so. However, for capital gains tax (CGT) and stamp duty land tax (SDLT) purposes, there are specific rules. For CGT purposes, if the amount paid (the consideration) is 'reasonable', this is used for the CGT computation. If the amount paid is not reasonable (i.e., too low or too high), the CGT rules state that the market value is used instead. For example, if A transfers a property worth £250,000 to B for £100,000, the CGT market value rule provides that the transfer is deemed to have been made for £250,000 (see HMRC’s Capital Gains Manual at CG14530). With regard to SDLT, usually the amount actually paid is used for the SDLT computation. However, for exchanges, the SDLT rules can be found in HMRC’s Stamp Duty Land Tax Manual at SDLTM04020A.