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SDLT - Buy to Let for Bare Trustee of minor beneficiaries

Benzene
Benzene Posts: 18 Forumite
edited 24 June 2017 at 10:12AM in House buying, renting & selling
My wife is a full-time house wife and has no regular income.

She is currently planning to buy two small apartments, worth £50,000 each. She received gifts (worth £100k) from me over the past 15 years.

I own a house and we (including 2 minor children, aged 2 and 4) all live happily together. :)

She intends to open two bare trusts (for each child) and be the sole bare trustee. She would then buy two 'buy to let' apartments (i.e. £50,000 each on each of our minor child's name). Both minor children will be the beneficiaries and they do not own any other property.

Would she be paying 3% SDLT (stamp duty) on each property?

I do not think she should... Appreciate your thoughts...

Thanks in advance for your time!

PS. From the following reference, 5.7 on page 20 says:
A bare trustee purchaser is ignored for the purposes of determining whether a purchase is subject to the higher rates, the absolute beneficiary or beneficiaries are treated as the purchaser or purchasers.

Ref: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/570876/SDLT_Higher_rates_for_additional_properties.pdf
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Comments

  • ACG
    ACG Posts: 23,677
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    Why not speak to a tax advisor?
    I am a Mortgage Adviser
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  • 00ec25
    00ec25 Posts: 9,123
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    you are a sophisticated investor clearly with money, so pay for professional advice
  • Cakeguts
    Cakeguts Posts: 7,627
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    Apart from the trust issues. What makes you think this is a good idea? You have these two properties in your children's names so who pays for the repairs when you have a tenant who has stopped paying rent the trustee or the children? The fact that the properties are only costing £50k each puts them in the bottom of the lettings market and so more likely to attract tenants who are going to stop paying rent. Good tenants are not going to be interested in properties that cost £50k. Have you looked at the Local Housing Allowance for your area to see if people claiming housing benefit or universal credit with get more rent? If they can they won't be interested in renting these properties either.

    So what do the rules on trustees say about who pays for repairs on a property where no income is being received? Is the trustee personally liable?
  • silvercar
    silvercar Posts: 46,861
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    A bare trustee purchaser is ignored for the purposes of determining whether a purchase is subject to the higher rates, the absolute beneficiary or beneficiaries are treated as the purchaser or purchasers.

    So the little children are the absolute beneficiaries. Do they intend to live in the property or let it? If letting it then they pay the higher sdlt.
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  • 00ec25
    00ec25 Posts: 9,123
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    edited 24 June 2017 at 2:30PM
    silvercar wrote: »
    So the little children are the absolute beneficiaries. Do they intend to live in the property or let it? If letting it then they pay the higher sdlt.
    ? not sure how many times this has been covered on here, but it's a lot.

    Higher rate SDLT is not based on the use to which the property is put. It is not a tax on BTL!

    it is based on whether the owner is buying an additional property or not
  • G_M
    G_M Posts: 51,977
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    I've learned a lot about property, tax, letting, conveyancing and related topics from haunting these forums over the years.

    But I can't answer this one so suggest it is time for professional advice.

    On the face of it, you appear to be right - the kids are the Beneficiaries and hence it's the number of properties they each own that matters.

    But then, under 18s can't own property, so can they be 'Beneficiaries' in this context? I don't know.

    Again, as Cakeguts suggests; are they genuine Beneficiaries in law if they don't/can't cover the costs as well as the income?

    I suspect that if this were possible, 100s of BTL landlords would be putting their properties into their kids names not just for the SDLT advantages, but also for income tax purposes............

    Any tax-lawyers reading this?
  • You need to contact a STEP qualified accountant/lawyer.
  • Benzene
    Benzene Posts: 18 Forumite
    Cakeguts wrote: »
    Apart from the trust issues. What makes you think this is a good idea? You have these two properties in your children's names so who pays for the repairs when you have a tenant who has stopped paying rent the trustee or the children? The fact that the properties are only costing £50k each puts them in the bottom of the lettings market and so more likely to attract tenants who are going to stop paying rent. Good tenants are not going to be interested in properties that cost £50k. Have you looked at the Local Housing Allowance for your area to see if people claiming housing benefit or universal credit with get more rent? If they can they won't be interested in renting these properties either.

    So what do the rules on trustees say about who pays for repairs on a property where no income is being received? Is the trustee personally liable?

    The property is in the North East where the affordability is rock bottom anyways.

    In regards to the liability... All the proeceed and reinvestment rights/ liabilities will be for the trustee...
  • Benzene
    Benzene Posts: 18 Forumite
    G_M wrote: »
    I've learned a lot about property, tax, letting, conveyancing and related topics from haunting these forums over the years.

    But I can't answer this one so suggest it is time for professional advice.

    On the face of it, you appear to be right - the kids are the Beneficiaries and hence it's the number of properties they each own that matters.

    But then, under 18s can't own property, so can they be 'Beneficiaries' in this context? I don't know.

    Again, as Cakeguts suggests; are they genuine Beneficiaries in law if they don't/can't cover the costs as well as the income?

    I suspect that if this were possible, 100s of BTL landlords would be putting their properties into their kids names not just for the SDLT advantages, but also for income tax purposes............

    Any tax-lawyers reading this?

    [url]Http://www.taxationweb.co.uk/forum/sdlt-charge-children-purchase-t50364.html[/url]

    Came across this....
  • Benzene
    Benzene Posts: 18 Forumite
    Interesting read.....

    Bare trusts

    This arises where the beneficiaries are absolutely entitled to the trust property, including where the beneficiary simply can’t own the legal title for some reason (such as age or disability). A “nominee purchaser” arrangement is also a bare trust. In these cases, HM Revenue & Customs (HMRC) simply looks through the trust and treats the beneficiary as owning the property. So the surcharge will apply or not by reference to the position of the beneficiary.

    Ref: http://www.mills-reeve.com/a-question-of-trust-sdlt-surcharge/
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