Stamp duty & gifts of money.

epitome

Could have put this in the House buying section.... but here it is.

If persons A & B wanted to buy a house and decided to buy it in person A's name because they would be a 1st time buyer, and would thus not pay any stamp duty.......

If subsequently, person A was to "sell" a share of the property to person B of less than 125K value, would person B pay stamp duty on the portion considering the portions value it is below stamp duty threshold? Thus persons A & B end up with a house in both names and have avoided paying stamp duty?

If persons A & B get married, in the future, all property belongs to each other and thus persons A & B now both own the property (albeit not registered with land registry in both names) and have thus avoided stamp duty?

For the scenario to work to begin with, person B will have to gift £110K to person A, to enable person A to buy the house.
Is such a gift declarable to HMRC?
and once declared is it taxable?

CLAPTON

seems a very high risk strategy to save a max of 2.5k

will A require a mortgage?
how will they explain their large deposit to the lender; lie and commit fraud?

B is of course taking a very large risk giving A £110k without any security (like half the house)

getting married doesn't mean all property is joint

giving money away is tax free

epitome

There is no mortgage, there is no risk. Had there been a mortgage, A would not have committed fraud because there would be nothing to lie about, large deposit on house, no need to explain where it came from........ end of.

So gifts are not taxable. How about stamp duty when B at a later date collects their share of the house.... a share worth under 125K? i.e. does it go on the portion bought or the total value of the home regardless of the value of the portion bought?

Of course, it doesn't have to be a gift, B could lend A the money, and reclaim the money when they buy a share of the house.

BoGoF

epitome wrote: »

There is no mortgage, there is no risk. Had there been a mortgage, A would not have committed fraud because there would be nothing to lie about, large deposit on house, no need to explain where it came from........ end of.

The major flaw in your masterplan is that there IS a need to explain where the deposit came from.

CLAPTON

you're saying that 'A' doesn't require a mortgage to either purchase the property or pay off 'B'; so why does A need to borrow or be given 110,000 in the first place

epitome

These are the facts so far.

A & B are obviously bf/gf but not married. They may even not be classed as partners.... yet.

They have enough money collectively to buy the house without a mortgage.

B gives (or lends) 'A' a lot of the money.

We have already established a gift or a loan are not declarable and not taxable.


Questions outstanding are...

When B recovers the money they loaned to A, in the form of a share in the property, and that share is less than 125K does B pay stamp duty because the house as a whole is worth more than 125K or does B pay no stamp duty because the portion they are buying is less than 125K?

Are there any other pitfalls to the master plan?

epitome

BoGoF wrote: »

The major flaw in your masterplan is that there IS a need to explain where the deposit came from.

This is a sub thread discussion on an issue which will not arise.... so not really that important. However just to go with your train of thought....
Are you talking about explaining where a deposit for a mortgage has come from? Do you have to tell the mortgage lender where the deposit came from? The money is in your account, isn't that all they care about, that you have the money you say you do and you transfer it to the mortgage lender.
If you have to explain it why not just say I borrowed it from someone?... or someone gave it to me. That's the truth.

There would be no need for a mortgage, so masterplan is up and running again.

CLAPTON

they are clearly buying the property as joint venture as the money is clearly not a gift.

my reation that stamp duty is therefore payable

however my knowledge is insufficiently comprehensive as to what HMRC will make of this