New SDLT Rules when partner does not own a property?

by Readers Question

9:21 AM, 8th April 2016
About 3 years ago

New SDLT Rules when partner does not own a property?

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New SDLT Rules when partner does not own a property?

I have a question about the new SDLT rules, and I am hoping someone is able to assist:

For inheritance purposes (7 year rule), a few years ago, my brother and I were added to the deeds of 3 x properties owned by my parents. Those three properties are not my main residence (they are in the Midlands, and I rent in London for work). These properties are rented out, and I do not receive any of the income from those properties.

I am now looking to buy a home with my girlfriend (not currently living together) – She does not own a share of any property. I do not own more than 50% of any of the properties (actually, I don’t own any of them, but I am on the deeds of them), and I do not receive an income from those properties. Would I be liable for the additional 3% stamp duty?

Any help or advice would be greatly appreciated.

Thanks

Luther

Stamp



Comments

Neil Patterson

9:23 AM, 8th April 2016
About 3 years ago

Hi Luther,

I added the flow chart above for you. I think you will end up paying the additional 3% but I am not sure on this one if anyone else knows?

Barbara Gwyer

11:11 AM, 8th April 2016
About 3 years ago

I would like to know the answer to this one as my son is in exactly the same position. It doesn't seem fair that if I were to sell my main residence and buy a new residence within three years then I can reclaim the extra 3% but someone buying their first residential home should be penalised. (Of course, then again, since when was this current government fair when it comes to property issues?)

Sunny K

11:16 AM, 8th April 2016
About 3 years ago

The purchase of new or replacement of existing main residence will NOT incur the additional SDLT rate irrespective of how many other properties you own in personal or company name. Just confirmed this will SDLT office. For verbal confirmation call them on 03002003510. For written response, write to them on HM Revenue and Customs – Birmingham Stamp Office
9th Floor, City Centre House
30 Union Street
Birmingham
B2 4AR
United Kingdom
If you are using the DX service send to:

HM Revenue and Customs – Birmingham Stamp Office
DX 15001
Birmingham 1
United Kingdom

Unfortunately they don't have an email address yet.

patrick maher

12:56 PM, 10th April 2016
About 3 years ago

Hi,
I don't think Sunny K is correct. As a basic rule, I think anyone buying a property which results in their having a second property is caught. However I think there may be an exemption where your interest in the other properties is worth less than £40,000.
Luther you say you don't get any income from the other properties. This might mean that your interest in each of them is worth less £40,000. However this could also point to another possible problem which is that if your parents are reserving a benefit from the properties (by keeping too much of the income from them) they may not succeed in avoiding Inheritance Tax on them.

Michael Barnes

16:11 PM, 10th April 2016
About 3 years ago

Reply to the comment left by "patrick maher" at "10/04/2016 - 12:56":

I agree that Sunny K does not appear correct.

I believe that you are not correct either.

I believe that the value of existing properties does not matter, and the £40K applies to the full price of the new property.

Sunny K

16:50 PM, 10th April 2016
About 3 years ago

The new SDLT rules are creating lots of confusion. It's best to confirm one's status with legal advice or directly from HMRC on contact details above. The acid test lies in interpreting whether the main residence is deemed replaced.

linda green

0:14 AM, 11th April 2016
About 3 years ago

I`m also surprised that you were told this Sunny.

Just to add further confusion - I wonder what happen if you owned a buy-to-let, lived in rented accommodation for a number of years and then purchased the rented accommodation! After all it would have been your main residence for many (possibly) previous years.

Questions...questions....

Graham Bowcock

9:15 AM, 11th April 2016
About 3 years ago

Luther

It seems you may have been drawn into some tax planning scheme which you are not fully appraised of and are now about to come across the consequences (as a result of the changes in the law). Surely if you are on the deeds of the properties then you are a joint owner. Your parents (as other joint owners presumably) could not act unilaterally in decision making and would need your consent, especially to sell.

I believe that technically a share of the income is yours as you are a joint owner. You will also share the obligations of a landlord (and should be named on the tenancy agreement as such).

I suggest you review your current position and establish your ownership and income credentials. There may be something more complex behind this, such as the use of a Trust, and you need to get to the bottom of it. Once you have done this you can then determine how best to move forward with your purchase, although from the work I have done I don't think you will escape the SDLT penalty - perhaps your parents will pay from the share of rent they didn't pass on!

Michael Barnes

10:46 AM, 11th April 2016
About 3 years ago

Reply to the comment left by "linda green" at "11/04/2016 - 00:14":

The regulations are worded for number of properties owned. Therefore rented accommodation has no effect.

Anthony Wilson

17:19 PM, 12th April 2016
About 3 years ago

Luther

See this site and see below...

https://www.gov.uk/government/consultations/consultation-on-higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties/higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties

I have read the sdlt guidelines in detail in the guidance note dated 16th March 2016 which has in Chapter 8 34 Q and A s about various situations..

I am sure Sunny is wrong because if you are not selling a home it falls within the example in Q2 and the higher rate is payable.

Q7 explains that if your share of existing property is less than £40,000.00 then the higher rates will not apply..(but it does not explain how any mortgage is dealt with).

Q27 The reply implies that trustees of a bare trust are not liable for the additional SDLT if they purchase for themselves.. therefore if you are simply a trustee for property which is beneficially owned for your parents and you have not enjoyed any personal benefit from it and will not do so then you should not pay the higher rate on the purchase of your new home. To make sure you could do a declaration of trust with your parents confirming that you have no beneficial interest in the other properties.. but as Patrick and Grahame point out.. there may be other implications eg increased inheritance tax if it applies if you inherit the properties! Hope this helps.

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