Avoiding the additional stamp duty by transfer of deeds?

Avoiding the additional stamp duty by transfer of deeds?

10:01 AM, 6th January 2022, About 3 weeks ago 15

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I bought a 2-bed flat in 2016 in Scotland as my main residence for £167k and have £77k left on the mortgage, the flat I believe now to be worth only ~£90k.

I moved back to England and bought a second home in 2019 (main residence) for £267k with £200k left on the mortgage, the house I believe now to be worth ~£300k.

I didn’t want to sell my flat because of the huge loss I would make, so I rent it out to a friend (albeit still on a residential mortgage) including bills but for less than the monthly mortgage payments + bills etc.

I paid additional surplus stamp duty on my second home in England (~£12,000) but understand if I sell my flat within 3 years I can get the additional part (~£8k) back but when my flat is worth so much less now than in 2016, I don’t want to sell it and accept the loss especially when it is being rented out.

I am a higher taxpayer (40%) and my girlfriend is a lower taxpayer (she doesn’t own any property) and my mother is a lower taxpayer (shared 50% ownership with my dad and mortgage free). My mother inherited a house off her mother in 2020 mortgage free and rents it out as an HMO. I have a sister who is also a lower taxpayer and homeowner. I don’t have any children.

I am the only one down on both mortgages but interested in purchasing a new property with my girlfriend (£400k-ish in England) but don’t want to pay the £22k stamp duty bill and don’t really want to sell my first flat at a significant loss. My second main home in England I am happy to sell as it’s increased in value but don’t really need to, to afford the third shared place with my girlfriend, so I am open to keeping and rent it out or selling.

My girlfriend doesn’t have as much savings or a high paid job so wouldn’t be able to afford £400k new home and soon as my name is involved we would be stung with a £22k stamp duty bill as it stands. I don’t particularly want to give my girlfriend £50kish, and it all be under her name as owner as it would leave me vulnerable and friends of friends have found themselves in a position which they significantly regretted doing similar.

I appreciate it may sound like I am trying to have my cake and eat it, while also insuring myself against risk, but we have to start somewhere –

Is there any options I can take such as transfer deed of flat to Mum as beneficiary and her pay the £1,500 (3% of the £50k which is above the threshold of £40k if valued at £90k) but I still pay the mortgage and sell my second home the usual way to avoid the additional stamp on my third shared place with girlfriend and I get the £8k additional stamp back (minus £1,500 I would give back to Mum)?

Or move both current properties over to a LTD/LLP?

Many thanks

Mike



Comments

by SimonP

17:53 PM, 6th January 2022, About 3 weeks ago

I wore myself out just reading this. Speak to an accountant and stop penny-pinching.

by Katy Ann

19:52 PM, 6th January 2022, About 3 weeks ago

To claim back the £8K SDLT on your current home, you'll have to dispose of the (currently let) Scottish flat within the required time period. You're suggesting gifting the beneficial interest in the Scottish flat to your mother, while retaining the mortgage debt yourself. The main sticking point with that plan is getting your mortgage lender to agree to it. If you genuinely transfer the flat to someone else, you’ve got no rights over the future use of the property therefore the lender has no security for their debt. If you succeeded in transferring the flat to your mother while somehow retaining rights to the property, them you've not disposed of a sufficient beneficial interest for you to legitimately be eligible to reclaim the higher rate of SDLT. If you transfer both the flat and the mortgage debt to your mother, then your mother would be liable to SDLT at the higher rate on the value of the debt taken over, because her taking over the mortgage debt is treated in the same way as her paying you that amount for the property.

by Freda Blogs

11:38 AM, 7th January 2022, About 3 weeks ago

"It may sound like I am trying to have my cake and eat it, while also insuring myself against risk"

You may need to reconsider that statement. I can’t comment on the accounting aspects of your question, but regarding your Scottish property, you say it is let, still on a residential mortgage. Aside from the fact that letting is probably against your mortgage Ts&Cs, I believe that any insurance policy will also be invalid as a result and will not pay out – so actually you are running much higher financial risk by not regularising that mortgage and obtaining proper insurance cover.

by Graham Benton

12:39 PM, 7th January 2022, About 3 weeks ago

Look up Joint Borrower Sole Proprietor. Your girlfriend can be the name on the deeds and you can protect your financial interest using a separate Deed of Trust.

by michael O'Connor

14:43 PM, 7th January 2022, About 3 weeks ago

Reply to the comment left by Freda Blogs at 07/01/2022 - 11:38
Consent to let received and insurance reflected. Just wanted to clarify it is not a buy to let mortgage currently as that often changes options.
Thanks

by michael O'Connor

14:43 PM, 7th January 2022, About 3 weeks ago

Reply to the comment left by Graham Benton at 07/01/2022 - 12:39
Thanks Graham - that was the direction I was looking for

by michael O'Connor

14:47 PM, 7th January 2022, About 3 weeks ago

Reply to the comment left by SimonP at 06/01/2022 - 17:53
The forum is used for an initial steer and I might well see an account once I know what I am asking for, if that is what is needed after collecting initial thoughts.
No thanks,
Mike

by michael O'Connor

14:56 PM, 7th January 2022, About 3 weeks ago

Reply to the comment left by Katy Ann at 06/01/2022 - 19:52
Thanks, I understand and knew this would be difficult but wasn’t sure if I could transfer majority to her so I only own a minor stake. HMRC condition c or d (can’t recall) says dispose of major stake which I would pass on that basis. I am sure they knew people were doing this so tightened up in 2018 and class a major stake as any stake at all I interpret

by Wayne Hoban

15:36 PM, 7th January 2022, About 3 weeks ago

If you replace main residence with main residence (ie sell your current home when buying a new home) then the additional 3% does not come in to play.

If you wish to retain the current home and buy a new home, you could sell the current home in to a Ltd Co and buy the new home, achieving the replacement of main residence, but you will need to seek professional tax advice on whether the costs warrant it.

by michael O'Connor

16:18 PM, 7th January 2022, About 3 weeks ago

Reply to the comment left by Wayne Hoban at 07/01/2022 - 15:36
Thanks Wayne - i reread HMRC terms a-d last night and agree/understand your first point now as replacing main residence. Previously the guidance and calculators ask do you own another property (the flat) which spit out shocking numbers due. Initially thinking I am always going to be stung with additional as long as I had that flat which didn’t seem fair.

Good option regarding comment two. Will seek further.
Thanks,
Mike

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