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Where Taxpayers and Advisers Meet

Additional property query

Joined:Thu Jun 17, 2021 10:02 pm
Additional property query

Postby jargo » Thu Jun 17, 2021 10:20 pm

Hi all, firstly thank you in advance to anyone who can offer any advice on this - We’re considering a property purchase and we’re wondering if there’s a more tax efficient way to move forwards with regards to SDLT. Here’s the scenario:

I currently solely own a property worth approximately £275K, with around £220K outstanding on the mortgage.

My partner (we’re not married) who I’m looking to purchase a house with doesn’t own a property and never has so I independently is considered a first time buyer.

The house we are looking to buy has a value of approximately £525K, we have a deposit between us of 15% plus reserves for fees and SDLT.

Our earnings are such that we will be accepted for a mortgage buying the house together even if my current property wasn’t being let out (although the intention is to rent out that property ultimately).

If we just proceed based on this, we will pay the normal rate SDLT plus the 3% additional property levy, and my partner forfeits the right to ever buy as a FTB.

The option we are considering is as follows:

My partner purchases my property from me as a first time buyer on an 85% mortgage and gets the benefit of no SDLT (Her earnings are such that she would be accepted for this), with the intention of living there at least temporarily.

I will then purchase the new property solely too (my earning will allow this) on an 85% mortgage with benefit of not paying the additional rate stamp duty. For the short to medium term, this arrangement is fine and actually we would take comfort cleanly owning two separate assets should anything happen.

A mortgage broker has confirmed the above isn’t particularly challenging. My question is, is there a way later down the line to reassign the assets so that I own my old property independently again, and my partner becomes a joint owner with me on the new property, without getting stung for SDLT again? As mentioned we are not married now, but could be in the future. If not become owners, is there ways to secure the equivalent benefit if the property is sold, again without getting hit for SDLT, or which ever way it’s done, will we get hit for it again at some point? (Assuming the rates don’t change)

Sorry for such a long message and any help appreciated!

Joined:Fri May 16, 2014 3:47 pm

Re: Additional property query

Postby AGoodman » Fri Jul 09, 2021 1:24 pm

Just re step 1, your partner needs to make sure that she occupies the property she buys as her main residence. There is a fair bit of precedent from the CGT rules that this must be an intent to occupy indefinitely. If she buys it with the intention of living there for 3 months and then moving into the other property, that is, at best, subject to challenge by HMRC.

I'd strongly suggest getting proper (paid) advice before doing this and trying to circumvent the rules brings in questions beyond the obvious black letter of the law, particularly if you do more transactions and the original property ends up back with you.

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