The Bank of Mum and Dad gone pear shaped with new SDLT

by Readers Question

11:24 AM, 15th February 2016
About 3 years ago

The Bank of Mum and Dad gone pear shaped with new SDLT

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The Bank of Mum and Dad gone pear shaped with new SDLT

Will the new Stamp Duty regs lead to another series of unforeseen consequences for FTBs?pear

Those parents who have chosen to assist their children into the property market may well have found it necessary to purchase jointly or in common with their kids. When mum & dad choose to move they will presumably find themselves having to pay the additional 3% on their own new home. They may have thought twice about offering to help if they’d known this was on the horizon.

At the other end of the spectrum, those mums and/or dads who find themselves beneficiaries to all or part of their own parent’s home (which may well still be lived in by one of the parents on the death of the other), then equally mum & dad will pay the additional tax if they wish to move.

Once this becomes clear, presumably fewer and fewer mums & dads will be keen to assist in a FTB purchase with their children, thus reducing even further the FTB purchases that our beloved leaders purport to be supporting with this and Clause 24.

It also begs another question. If one parent only is party to the children’s property (perhaps by virtue of the mortgage/income requirement) then when mum & dad want to move, and assuming that their new home is purchased jointly or in common, then will the additional duty be chargeable only at 50%, because only one party to the purchase owns another property?

As a 50 something with two adult kids, and having been left 50% of my parent’s home after my father’s death, these matters give me pause. Even if we sold our investment properties, we’d be left in the position of having to think twice about moving. We can’t ask the kids or my mum to buy us/me out and the ramifications will apply not only to helping FTBs but even to making arrangements for care provision etc for older relatives. Indeed I assume that if my own mother wanted to move then I would effectively have to gift to her my share of the proceeds of the sale rather than buy jointly with her in order to avoid her purchase attracting the additional duty. So not only FTB, but potentially ‘last time buyers’ could be affected.

Or have I missed something and all of this has been fully thought through and catered for?

Helen



Comments

Neil Patterson

11:27 AM, 15th February 2016
About 3 years ago

Funnily enough there is a new article today partially covering this subject as well "Interesting new product for Fist Time Buyers via Bank of Mum and Dad" see >> http://www.property118.com/interesting-new-product-for-ftbs-via-bank-of-mum-and-dad/84565/

Mike W

13:37 PM, 15th February 2016
About 3 years ago

The effect of this tax is far more wide ranging. There are many professionals who work away from home on contracts which last 1-2 years. Where these individuals have family and are located in the (more expensive) south the worker has to find weekday accommodation. The cost of getting out of and then back into the southern market can result in effective downsizing. The worker may choose to buy a cheap 1 or 2 bed flat rather than rent. With an extra 3% perhaps not.

Then there are students who perhaps cannot get a mortgage because they have no income. For decades parents have stepped in to buy their child a place to live whilst at university. Blair comes to mind? It saves on those horrendous and more expensive charges for halls and one may 'rent a room' too. A bygone era?

Tampering with regulation affects the market. Who was saying that too much regulation and interference from government was bad?

Helen Morley

18:18 PM, 15th February 2016
About 3 years ago

Neil, that is an interesting take. One wonders whether a back-to-back against an account partly funded by a charge on property A owned in one name and used to purchase property B in a different name will be sufficient to convince HMRC. Really very interesting to watch.

Mike, indeed some of those who are working away from home are MPs!! I wonder whether they will be exempt!

I can certainly see the uncertainty surrounding all of this, and the potential cost of additional tax planning will reduce significantly the help available from parents to their kids. The most recent estimate I can find from a year ago suggests that around 45% of ftbs take help from parents. So the 'extra' 500,000 properties that 'will' come onto the market may find fewer ftbs to buy them (if indeed they were ever going to).

Does anyone know if this will affect non-UK nationals?

Clearly returning expats will need to be aware.

Also, presumably it only involves second and subsequent properties within the UK. Might sound like a daft question, but quite frankly at the moment anything seems possible!!

Chris Byways

20:06 PM, 15th February 2016
About 3 years ago

Reply to the comment left by "Helen Morley" at "15/02/2016 - 18:18":

The daftness, or rather mendacity knows no bounds.

The whole tenant tax thing is so unnessary. GO is terrified there may be a catastrophic collapse in the economy/house prices/banks solubility, and of course high gearing is a risk if there was a 50 or 80% drop.

Possible but highly unlikely. If he had only thought about it when it first became obvious (years ago) he should have said FUTURE. BTL mortgages should be limited to 50 or even 5% of values, so one can plan, rather than affect tenants and LLs who have taken out long term mortgage loans retrospectively.

But yes I understand the PROPPSALS re that property abroad will count, but we have to wait for the budget next month to find out how complex he will make it.

This is money says:
"Buying if you own a home abroad

Property owned globally will be relevant in determining whether a property purchased in England, Wales or Northern Ireland is an additional property.

This means that if someone is purchasing their first or only property in England, Wales or Northern Ireland, and they already own a property outside these areas, they may have to pay the higher stamp duty rate.

This would apply to a foreign homeowner buying in Britain, a Briton with a holiday home, or someone who owns a Scottish property."

http://www.thisismoney.co.uk/money/buytolet/article-3394231/Why-concerned-second-home-stamp-duty-reforms.html

Another side effect of parents assisting kids yet wanting to retain some control over the property if the married kid separate and lose half their life savings.

Michael Barnes

19:27 PM, 17th February 2016
About 3 years ago

There is no effect on parents moving: they are selling their main residence and buying a new main residence.

However, in future (unless the proposed rules are changed) parents cannot help to buy by becoming joint mortgagees with their children (as I have done) without the children's purchase attracting the additional 3% SDLT. (I raised this in my submission for the consultation on the proposals)


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