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Where Taxpayers and Advisers Meet

buying property on shared ownership scheme

mark@cafamily.org.uk
Posts:1
Joined:Wed Aug 06, 2008 3:04 pm

Postby mark@cafamily.org.uk » Tue Aug 12, 2003 3:24 am

I'm about to buy a property on a shared ownership basis - does anyone know how to calculate stamp duty payable on properties over £250,000 where you only purchase a percentage of the total value (e.g. 25%)? I'm told it is best to pay the full stamp duty but also possible to pay only the amount on the value purchased with an additional formula based on the rent to pay on the remaining share? Is there a formula?

paulc
Posts:33
Joined:Wed Aug 06, 2008 3:04 pm

Postby paulc » Tue Aug 12, 2003 6:51 am

You are right, special rules apply for shared ownership schemes.

The normal rules would involve payment of two lots of duty
(a)one payment now, which is calculated by reference to two elements
(1)the amount paid for 25% ownership (1% up to 250k, 3% above that)and
(2)the amount of rent paid - this depends on the length of the lease - assuming the lease is between 7 and 35 years, the stamp duty is 2% of the average annual rental payable under the lease
(b) stamp duty will then be payable if and when you acquire the balance of the ownership, based on the stamp duty rates in force when you do this

Alternatively you can elect to pay stamp duty once, now, based on the current market value of the whole property at 3% if the market value is between £250 and £500k.

Paul

aojuyah@hotmail.com
Posts:1
Joined:Wed Aug 06, 2008 3:06 pm

Postby aojuyah@hotmail.com » Sun Oct 12, 2003 10:34 am

Paul,

Your comments above is useful. However, can you define what is meant by rent- ground rent or the rent paid on the share owned by the housing association.

I addition, I understand from the tax office that the elements one pays tax on depends on whether the lease contains a s97 or s108 election. Apparently, if a s97 election is made then tax is only paid on the market value of the property and if s108 then tax is paid on market rent and ground rent.

Also if the lease does not contain any of the sections then tax is based only on the value of share bought.

Please correct me if I am wrong on any of the above points. I am currently in the process of buying a shared ownership property myself and i am gathering as much inf0 as possible.

Thanks

Agnes


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