So I’m currently in the process of purchasing a property at £729,000 under a single Freehold Title which is of mixed-use.
It consists of:
2 x 1 bedroom holiday flats (2nd floor)
1 x 3 bedroom flat below that (1st floor)
1 x annex to the rear with a courtyard (accessible from the 3 bedroom flat or ground floor)
2 x retails shops
Now given the property consists of 2 x shops and residential properties, the STAMP DUTY is capped at around £26,000.
Here's where it gets complicated and confusing, so any help will be great!
I will be buying it outright under all I have (£500,000) while having at my disposal a further £300,000 advanced from a friend in the form of a loan that I will pay back at 0.4% PCM, until two mortgages have been advanced for both the upper 1 x bedroom flats once the split is executed and the planning permission achieved. The reason for this is simply down to residential mortgages being much, much cheaper than a semi-commercial and my friend will make a little more than he can get from a bank win/win
The plan then is to create 5 x leaseholds under a newly created limited business while retaining the annex under the original freehold in my own name as A) I want to use this as my PPR & B) half the annex is somewhat of a building site anyway and as such, unlikely to get a mortgage advanced at any rate.
From what I have read, the best way to execute this is through a "Simultaneous Grant of Leases,’ as - I believe - HMRC won't argue these as separate transactions and as such, I will only be charged Stamp Duty once, and then, I'll need to use a"Sub-sale" or "Direction to Complete" structure where, at the moment of completion, the seller grants the leases directly to the company and the "reversionary freehold" to myself.
To repeat, I believe this the best route to avoid being unduly charged STAMP DUTY TWICE, while equally avoiding being subjected to ‘benefit in kind’ for what will, in effect, be my own home!
So my first question to you all is (1): is this permissible & indeed common practice, and as such is it unlikely to be flagged by HMRC for doing anything bad, or worse: charged Stamp Duty for each of the individual units!
Secondly, there’s the matter of the valuations.
Once the sale is processed and planning achieved, my intentions are to:
Raise mortgages on the 2 x 1 bedroom flats and return the funds forthrightly to to my friend.
Further down the line, raise a third mortgage on the 3 bedroom flat once the ‘minor works’ are complete and…
Retain the shops and annex long-term and, if at any time in the future I desire to raise capital, I can sell off the 1 x bedroomed flats or the 3 bedroom flat.
So, my second question is (2): given I purchased them as a whole at £729,000, is it commonplace and legal on dividing the property, to retain the sum total I paid? And, if so, (3) in wanting to pay back my friend ASAP, would it be sensible to price the upper 2 flats at the suitable price to cover this; thus pricing them slightly higher and the shops - which I intend to retain, slightly lower? However, in doing this I've heard this may be FLAGGED by HMRC under SECTION 53 of the FINANCE ACT? due to the rentable income being disproportionate to their values?
The monthly rent would be:
1. £550 & £950 (shops)
2. £2,400 (3 bedroom flat - HMO)
3. £900 & £900 (1 bedroom flats - holiday rates)
4. My New home.
And here are the valuations I think best suit my intentions and realistic:
1. 2 x shops - £20,000 & £24,000 (or to repeat should these be higher to iron out section 53 of the finance Act?) (5)
2. 1 x 3 bedroom flat - £260,000
3. 2 x 1 bedroom flats (top floor) - £170,000 & £170,000
4. 1 x freehold 1 bedroom flat (ground floor annex/building site) £85,000
Total: £729,000
So, based upon this, (4) can you see this as a sensible route through the pitfalls in order to achieve what I am honestly trying to do or if not what faults do you see and are there better alternatives to achieve my goals, including how best to value the properties.
Yours, one very confused but eager amateur
Keith