Is Stamp Duty due?

[bd6759]

In the OPs scenario there is no assumption of debt.

That is different to the scenarios you propose, so of course the result may be different.

[ben_power]

Thanks for the comments, I wish I could contribute more.

I can see both sides of the discussion. Whilst a appreciate the 'debt' isn't changing so in theory stamp duty might not be due I can't help that think this would fall further into the 'evasion' side of tax rather than the 'avoidance', or at least the end result would appear to whether intentional or not.

Speaking to the clients, they explain that the only reason they went down this road was that client 1 couldn't quite borrow enough to cover the mortgage so client 2 offered to help seeing as they both hoped the relationship would last and eventually assets would be split. It was purely that client 1 would then not only lose the FTB stamp duty relief but get clobbered with the second home owners rate. From an external perspective, that seems very unfair. They are both happy to pay the stamp duty and feel that second home stamp duty 'should' be due on client 2's share from a moral perspective.

The problem is that 'morals' and 'intentions' play no part of this so it's a legal discussion. I can't help that think the mortgage broker and conveyancer should have discussed this. The mortgage type is designed for parents going on the mortgage without owning a share of the property only it looks like the lender didn't care that the second party was unrelated.

Any thoughts as to how we should proceed?

[ben_power]

Thanks for the comments, I wish I could contribute more.

I can see both sides of the discussion. Whilst a appreciate the 'debt' isn't changing so in theory stamp duty might not be due I can't help that think this would fall further into the 'evasion' side of tax rather than the 'avoidance', or at least the end result would appear to whether intentional or not.

Speaking to the clients, they explain that the only reason they went down this road was that client 1 couldn't quite borrow enough to cover the mortgage so client 2 offered to help seeing as they both hoped the relationship would last and eventually assets would be split. It was purely that client 1 would then not only lose the FTB stamp duty relief but get clobbered with the second home owners rate. From an external perspective, that seems very unfair. They are both happy to pay the stamp duty and feel that second home stamp duty 'should' be due on client 2's share from a moral perspective.

The problem is that 'morals' and 'intentions' play no part of this so it's a legal discussion. I can't help that think the mortgage broker and conveyancer should have discussed this. The mortgage type is designed for parents going on the mortgage without owning a share of the property only it looks like the lender didn't care that the second party was unrelated.

Any thoughts as to how we should proceed?

[bd6759]

Did partner 2 contribute to the purchase price or to the mortgage repayments? If so, then partner 2 most certainly had an interest despite not being on the deeds, and the 3% surcharge ought to have been paid.

Partner 2 is not assuming any debt when added to the title. Partner 2 is currently jointly and severally liable for the whole debt and is not releasing partner 1 from any liability. Nothing will change in relation to the debt, and the deeming provisions cannot apply because at no time has there been an assumption of a debt. There are no SDLT consequences when that happens.

Your best bet is to tell HMRC that you think the 3% may be due. If they agree it will need to be paid with interest. But there is unlikely to be a penalty. Even if they insisted it was a careless error, a voluntary disclosure with full co-operation would result in a penalty loading of 0%.

[ben_power]

Client 2 did not contribute to the purchase and has not paid any of the mortgage, all finances have been provided by client 1, including legal costs, conveyancing costs and stamp duty.

[bd6759]

Client 2 did not contribute to the purchase and has not paid any of the mortgage, all finances have been provided by client 1, including legal costs, conveyancing costs and stamp duty.

That changes things about the original 3%. It would be difficult for anyone to demonstrate that he had an interest (even if there was the intention that he might).

My view on the assumption of debt hasn't changed.