Stamp Duty - Shared ownership

Paji1034

Hi,

Bit confused with the stamp duty for the shared ownership property....

I got 25% share of a flat valued at 140K in 2008.

Last week I valued my flat again as I was thinking to sell to move to new property..

The new RICS valuation is 125K.

If I buy rest of 75% share to get full hold of the property, will I have to pay the Stamp duty?

Thanks for help....

00ec25

it depends , what you are proposing to do is called "staircasing" and the rules for that depend on how much, if any stamp duty you paid when you originally bought the 25% share

either you paid stamp duty on only the original 25%
or you paid stamp duty on the full 140K even though you only bought 25%

it has to be one or the other , if you do not know then you must find out because we cannot progress your new question until we know .

fionajbanana

http://www.hmrc.gov.uk/sdlt/calculate/shared-ownership.htm#2

I cannot believe the HRMC have used £140k as an example which will help you which one you did!

Paji1034

Hi,


No stamp duty was paid when I purchased 25% share when value was 140K.

Now the full market value has been reduced to 125K and I am buying rest of 75% share.


The examples in the above HMRC link may not work in my case as the property value was same all the times in the scenario listed in this website.

My situation is different as the value of property has been reduced to 125K from 140K.

00ec25

Paji1034 wrote: »

My situation is different as the value of property has been reduced to 125K from 140K.

an EA is not qualified to advise on SDLT, you need to check with a solicitor

you opted to pay SDLT in stages. The property value is irrelevant. if you now buy the remaining 75% you go over the 80% threshold and what you have not understood is that the 25% + the 75% are LINKED TRANSACTIONS so they are added together to give the total "consideration" paid to date for the property. SDLT is payable on the consideration given, not the "value" of the property, so

you bought 25% and paid 140 x 25% = 35,000. Obviously £35,000 was below the threshold so you paid £0 SDLT

75% will cost you 125,000 x 75% = 93,750
you already paid 35,000

so your total consideration paid is 93,750 + 35,000 = 128,750, This is > the SDLT threshold so you will be charged 1% on 128,750

if you want to avoid SDLT you need to negotiate a discount on the price and get the 75% for less than 90,000

Paji1034

I can see your point.

I got reply from solicitor that the reason you did not paid the SDLT in 2008 was you were first time buyer? I think there is an option to pay SDLT on shared equity upfront.

Unfortunately I cannot negotiate the price as it is HA and they go with RICS valuation.

Is there any way I can find out from HMRC that what was agreed at that time for SDLT?

Paji1034

Found below on Wikipedia related to stamp duty back in 2008.

On 2 September 2008, the UK Government announced that the threshold for paying SDLT would be raised from £125k to £175k for one year, as from 3 September 2008.[9] In the 2009 Budget, the Chancellor extended this "stamp duty holiday" until the end of 2009.[10] In the 2010 budget, the Chancellor ended stamp duty on homes under £250,000 for first-time buyers for a two-year period only, while introducing a new 5% rate for properties over £1,000,000.

I think I need to find out which option was used at that time by me or my solicitor:

- Paid stamp duty upfront for full market value which was effectively nil
- Just paid initial stamp duty at 25% again effectively nil

Where I can find in my lease which option was used relate to stamp duty???

Paji1034

Any help please?

kingstreet

At the time of purchase, an election has to be made to HMRC;-

How SDLT is calculated on a shared ownership lease

When someone buys a share in a property through an approved shared ownership scheme they may have to pay SDLT. There are two ways to pay:

making a one-off payment based on the total market value of the property

Paying any SDLT due in stages

If the buyer decides to make a one-off payment up front this is known as making a 'market value election' for SDLT. If the buyer chooses to pay SDLT in stages then they pay anything that's due on the initial purchase amount. But then they don't have to make any further payments until they own more than an 80 per cent share of the property.

Each of the options for paying could suit different buyers, depending on their circumstances. It's up to the buyer to decide. The differences between the two payment options, and how SDLT is calculated in each case, are explained below.

http://www.hmrc.gov.uk/sdlt/calculate/shared-ownership.htm#2

Market value election - one-off SDLT payment

If the buyer decides to make a market value election, they make a one-off SDLT payment in the same way as if they'd bought a freehold or leasehold property outright from the start. The SDLT is based on the market value of the property at the time (this will be stated in the lease).

Once they've paid any SDLT due they won't have to pay any more on the property purchase. It makes no difference if they 'staircase' their ownership by buying a bigger share in the property later on, perhaps in several stages.

It's up to the buyer to decide if making a market value election could be advantageous. It's often most beneficial to do this when the total market value of the property is no more than the threshold for paying SDLT. The threshold is currently £125,000

The deadline for making a market value election

If you want to make a market value election you should do so when you send in the SDLT return. Alternatively you can make the election up to 12 months after the deadline for sending in a return (the 'filing date') by amending the return.

The easiest way to complete an SDLT return is online. Follow the links to find out more.

What if you change your mind about a market value election?

The law doesn't allow a market value election to be cancelled - so once you make a market value election (whether by filing or amending a return) you can't change your mind.

The market value election and buying a further share in the property

If someone buys a property under a shared ownership scheme and makes a market value election, they can go on to increase their share of the property without having to pay any more SDLT.
If they buy 100 per cent of the property by acquiring the freehold, they must complete an SDLT return to tell HM Revenue & Customs (HMRC). But they still won't have to pay any more SDLT.

If you did not make a market election at the time;-

Paying SDLT in stages - the initial transaction

If a buyer decides to pay any SDLT due in stages they'll pay less to begin with. But they may have to make further payments if they later increase their share of the property.

Initial transaction - SDLT is based on the amount paid
SDLT is initially charged on the premium paid for the grant of the lease.

So if, for example, the market value of a property is £140,000 and the buyer purchases a 50% share for a premium of £70,000, there is no SDLT payable on the premium because its value is below the current SDLT threshold of £125,000. But the buyer must still tell HMRC about it by completing a return.

However, if the market value of the property in the above example were £280,000 and the buyer bought a 50% share for a premium of £140,000 they would have to pay SDLT of £1,400 on the premium. This is because the value of the premium is above the threshold at which SDLT becomes payable at 1%.

It really appears that you need to ask your solicitor if a market value election was made at the time. Presumably the SDLT return he/she completed will confirm this?

Paji1034

The problem is I am not dealing with the same solicitor.

I will try and speak with her assistant.

If she could not help me out. Could I contact HMRC to find out if the election was made at that time???

I just have my land registry and lease document but it does not say anything about the SDLT.

kingstreet

You don't need the same person.

You ask the firm which represented you to look on your file and see what the SDLT return says.