Complicated house buy-out - escape stamp duty?

roofusb

Hi,

My girlfriend owns a house along with 3 friends, all 25% equal shares. They want to sell up but my girlfriend wants to stay, with me moving in with her, so is planning to 'buy out' the equity of the other 3 girls.

The house is worth 400k, with a 312k mortgage on it, so each girl has 22k of equity. My question is around stamp duty - technically she'd be buying 300k of house, so should pay 9k of stamp duty. But I think she could treat it as 3 separate transactions of 100k, and hence pay no stamp duty at all.

Can anyone advise if this isn't allowable, I can't see why it wouldn't be as they could genuinely be separate transactions with each girl?

Thanks,

R

theartfullodger

Surely the fair & decent British approach is to may those taxes due with good humour & promptly: Who would wish to do otherwise??

Stone me, the country needs the money bad...

getmore4less

HMRC site has some guidence on this,

might be worth a read

eg buying 2 houses of the same person can be considered as a single transaction for SDLT purposes.


Here is a start point follow the links
http://www.hmrc.gov.uk/sdlt/index.htm

this one might be relevent
http://www.hmrc.gov.uk/sdlt/calculate/linked-transfers.htm

roofusb

Thanks getmore4less - the second link is particularly relevant. It doesn't provide a firm answer either way, but by my reading of it I think my girlfriend's scenario could be classed as un-linked transactions, going by the following on the HMRC page:

[Transactions may be un-linked] if the speculator had bought each of the three houses from the same builder in three completely separate transactions with no prior agreement or option, no special price or discount, or anything else to link them

My gf could well buy each share completely separately at different times, and with no single transaction dependent upon any other. Methinks she'll need to seek proper legal advice though to make 100% sure.

Evilm

Talk to your solicitors. I don't think you could get away without paying the stamp duty unfortunately.

DPJames

What about paying one girl one month, the second girl a few weeks/months later, and then the third. Although that might get a tad complicated and don't know if the morgage company would be willing to play along.

Pass.

mynameisdave

Presumably the mortgage isnt going to be a problem? To buy them out will result in a mortgage of ~£370K - 90%+

roofusb

mynameisdave wrote: »

Presumably the mortgage isnt going to be a problem? To buy them out will result in a mortgage of ~£370K - 90%+

The 66k equity buy out will be coming from savings, so the mortgage would stay as-is (~78% LTV).

Doozergirl

If you bought each girl out separately, even if it didn't qualify for SDLT she'd have to remortgage each time which costs plenty in arrangement fees.

It's not just the LTV, it's the salary multiples. She earns enough to qualify for a mortgage of £370k?

EDIT: I see that you too appear to own a share of a house worth £400k and to buy out your brother would incur SDLT as well. Now that's just uncanny. Which of these houses do you plan to actually live in?

Crinz

roofusb wrote: »

The 66k equity buy out will be coming from savings, so the mortgage would stay as-is (~78% LTV).

The mortgage would not stay 'as-is', she would need to prove that she could afford a £370k mortgage on her own. If she cant then the lender will not agree to anyone coming off the mortgage.

What is her salary?

chewmylegoff

the transactions would clearly be linked - your example of buying three houses from one person is clearly not relevant to a situation where you are buying one house from three people. if your logic worked, it would be very common that when e.g. a married couple sold a house, it would be split into two transactions - one for each half - so that a lower stamp duty rate could be paid by the buyer. you are clutching at straws here.

there may, however, be some scope to not pay stamp duty here. i think your only option is to do as married couples do when they divorce and the house is transferred to one party - write to the revenue, explain the transaction, and ask them to waive stamp duty as it would be unfair to pay it twice on the same house.

i suspect they will not go for it in the circumstances you describe, though, because the house is currently owned by 4 unconnected parties who all paid stamp duty in respect of their individual acquisitions of part shares, rather than jointly paying the stamp on the whole house.

i expect the HMRC attitude will be "you are buying 75% of a house for £300k, you owe us 3% stamp duty on the value of the transaction", and there will be little you can do about this.