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  • FIRST POST
    • Benzene
    • By Benzene 24th Jun 17, 11:10 AM
    • 16Posts
    • 2Thanks
    Benzene
    SDLT - Buy to Let for Bare Trustee of minor beneficiaries
    • #1
    • 24th Jun 17, 11:10 AM
    SDLT - Buy to Let for Bare Trustee of minor beneficiaries 24th Jun 17 at 11:10 AM
    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
    Last edited by Benzene; 24-06-2017 at 11:12 AM.
Page 1
    • ACG
    • By ACG 24th Jun 17, 11:51 AM
    • 15,749 Posts
    • 8,044 Thanks
    ACG
    • #2
    • 24th Jun 17, 11:51 AM
    • #2
    • 24th Jun 17, 11:51 AM
    Why not speak to a tax advisor?
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • 00ec25
    • By 00ec25 24th Jun 17, 11:52 AM
    • 5,309 Posts
    • 4,657 Thanks
    00ec25
    • #3
    • 24th Jun 17, 11:52 AM
    • #3
    • 24th Jun 17, 11:52 AM
    you are a sophisticated investor clearly with money, so pay for professional advice
    • Cakeguts
    • By Cakeguts 24th Jun 17, 12:01 PM
    • 2,995 Posts
    • 4,154 Thanks
    Cakeguts
    • #4
    • 24th Jun 17, 12:01 PM
    • #4
    • 24th Jun 17, 12:01 PM
    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
    • By silvercar 24th Jun 17, 2:10 PM
    • 36,042 Posts
    • 152,232 Thanks
    silvercar
    • #5
    • 24th Jun 17, 2:10 PM
    • #5
    • 24th Jun 17, 2:10 PM
    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.
    • 00ec25
    • By 00ec25 24th Jun 17, 2:24 PM
    • 5,309 Posts
    • 4,657 Thanks
    00ec25
    • #6
    • 24th Jun 17, 2:24 PM
    • #6
    • 24th Jun 17, 2:24 PM
    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.
    Originally posted by silvercar
    ? 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
    Last edited by 00ec25; 24-06-2017 at 3:30 PM.
    • G_M
    • By G_M 24th Jun 17, 3:07 PM
    • 41,870 Posts
    • 48,443 Thanks
    G_M
    • #7
    • 24th Jun 17, 3:07 PM
    • #7
    • 24th Jun 17, 3:07 PM
    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?
    • bob bank spanker
    • By bob bank spanker 24th Jun 17, 3:16 PM
    • 538 Posts
    • 1,038 Thanks
    bob bank spanker
    • #8
    • 24th Jun 17, 3:16 PM
    • #8
    • 24th Jun 17, 3:16 PM
    You need to contact a STEP qualified accountant/lawyer.
    • Benzene
    • By Benzene 24th Jun 17, 4:40 PM
    • 16 Posts
    • 2 Thanks
    Benzene
    • #9
    • 24th Jun 17, 4:40 PM
    • #9
    • 24th Jun 17, 4:40 PM
    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?
    Originally posted by Cakeguts
    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
    • By Benzene 24th Jun 17, 4:41 PM
    • 16 Posts
    • 2 Thanks
    Benzene
    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?
    Originally posted by G_M
    Http://www.taxationweb.co.uk/forum/sdlt-charge-children-purchase-t50364.html

    Came across this....
    • Benzene
    • By Benzene 24th Jun 17, 4:53 PM
    • 16 Posts
    • 2 Thanks
    Benzene
    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/
    • silvercar
    • By silvercar 24th Jun 17, 5:32 PM
    • 36,042 Posts
    • 152,232 Thanks
    silvercar
    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............
    by G_M
    I suspect that the costs of creating the trusts, reporting requirements, tax considerations, knock on effects when kids become of age themselves etc may mean that the costs outweigh the benefits.

    As well as your tax situation now, you have to consider the effect on kids tax situation in years to come as well as what any government may enforce on your tax situation in the intervening years.
    • teddysmum
    • By teddysmum 24th Jun 17, 6:59 PM
    • 8,490 Posts
    • 5,030 Thanks
    teddysmum
    What if something arises like no gas certificate or personal injury to an occupant (eg wall collapses or floorboards give way) ? Who is financially responsible ?
    • G_M
    • By G_M 24th Jun 17, 10:22 PM
    • 41,870 Posts
    • 48,443 Thanks
    G_M
    What if something arises like no gas certificate or personal injury to an occupant (eg wall collapses or floorboards give way) ? Who is financially responsible ?
    Originally posted by teddysmum
    .... and who goes to prison?The beneficiary or the Trustee.....?
    • Benzene
    • By Benzene 24th Jun 17, 10:39 PM
    • 16 Posts
    • 2 Thanks
    Benzene
    It should be trustee! He/ she is responsible for finances and other matters...
    • xylophone
    • By xylophone 25th Jun 17, 12:33 AM
    • 23,385 Posts
    • 13,588 Thanks
    xylophone
    This will be a "parental settlement"


    http://www.taxcafe.co.uk/resources/buying_property_for_children.html
    • G_M
    • By G_M 25th Jun 17, 8:55 PM
    • 41,870 Posts
    • 48,443 Thanks
    G_M
    Originally posted by xylophone
    Very enlightening.

    Hopefully Benzene is aware of these intracacies (or at least, Benzene's wife!), has taken suitable advice, and will not end up falling foul of any leglislation.
    • SDLT Geek
    • By SDLT Geek 10th Sep 17, 8:11 AM
    • 22 Posts
    • 11 Thanks
    SDLT Geek
    There are special rules for properties held for children under 18 within the legislation for the 3% surcharge at Finance Act 2003/Sch4ZA. The effect is to treat a property bought for a child as if bought for the parents for surcharge purposes. As a property is already owned, the surcharge will be due on the purchases.
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