Stamp Duty on Shared Ownership

ironman1

I have asked a similar question recently but can someone please confirm I stand on this as I have to give a decision soon.

We bought half our property in 2009 for £95,500 (£191,000 full Value) on this share we did not pay Stamp Duty.

Now we are 'Staircasing' the 100% of the full value of £205,000 (around £110,000 after the original £95,000 paid) will we now face a Stamp Duty bill of £2,050?

I was really hoping it would be just the 1% on the £110,000 we are now purchasing but have been told not.

I would not recommend ever buying a Shared Ownership place unless you are struggling for the deposit by the way!

Thanks

lindsaygalaxy

From what I know, if you did not pay the 1% when you bought the first share, you will now have to pay the stamp duty on the whole amount you are buying.

ironman1

Im sure you are right which is not great news! The thing is if we were fully aware of this during the original 50% purchase I am sure we would have paid the 1% at the time as we had a few grand saved up.

Unless it was a case of 'You can pay £960 on top of this deposit/legal fees or not' and we chose the latter!

So now it is a case of £800 fees to Solicitor, about £300 for the valuation fees, another £400 odd to the bank for fees they add on plus about £2k Stamp Duty.Take out the deposit side and it is identical to the original purchase!

somethingcorporate

I very much doubt you'd get away with paying the reduced amount - I don't think the intention of SO was to avoid SDLT (not saying you chose it to be but if this was a side effect then people would likely be strongly utilising it!).

ironman1

To be honest the only reason we bought this way is mainly due to the half deposit. Then I have just tried my best at getting the 50% share of the mortgage down by overpaying. We currently owe £56,000 on that but with increasing rent we just felt buying the other 50% would be worthwhile especially as we plan to move in the next few years. It seems very hard selling say, a 70% share

kingstreet

If you'd made the MVE when you bought the property, you would have paid £1,910 then compared to £2,050 now, so not a lot of difference.

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

MVE's main benefit is if the property increases in value by a greater rate than yours. As you can see, the difference in your case is only £140.

ironman1

Ah that makes me feel better. Thanks. I have got £5k saved but wanted to build on that not use it. But it would be a silly move imho if we don't buy the full property while we can

Tjrw1985

Not what I understood to be honest. See the breakdown on the hmrc website.

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

Basically the examples it gives on staircasing is that you pay 1% on the amount that takes you over 80%.

So and this is my understanding of the example, in your instance

1) Purchased 50% at £95,500 so no SDLT was payable.
2) Buying the remaining 50% at £110,000. As this transaction takes you over 80%, the 1% is payable on the £110k. Meaning you will need to pay £1100 in SDLT.

ironman1

I thought/hoped that was the case but I cannot get a confirmed answer. Even from the solicitor! Even the mortgage advisor said he doesn't know too much regarding shared ownership...

Tjrw1985

As far as I would be concerned, I would only pay 1% on the transaction, which is what is implied on the HMRC website

ironman1

I just called the Housing Association and the lady said it is up to us in terms of what we pay. Basically saying we do only pay the 1% of £110,000... If we like?!

ha ha it is driving me insane