Stamp duty 2nd property - confusion?

diper123

Hi can anyone help with this particular scenario. I own a couple of properties, one I live in, one is a buy to let. Three years ago my Mum was diagnosed with Alzheimers and moved her to a bungalow nearer to me. My Mum could not afford the bungalow so she paid for 40% of it , my sister paid for 40% and I paid 20%. My sister and I care for Mum 100%. She stays in the bungalow with my sister 50% of the time and with me 50% of the time. Eventually I would like to buy my sister out of the bungalow when Mum is no longer with us but I was not sure if I would have to pay stamp duty when I purchase/inherit the remaining 80% of the property. The property cost £124, 950 when we bought it. Any advice would be welcome. Cheers .

DTDfanBoy

As you own an additional BTL the higher rate stamp duty is due, if you didn't own the BTL it wouldn't be.

booksurr

diper123 wrote: »

Hi can anyone help with this particular scenario. I own a couple of properties, one I live in, one is a buy to let. Three years ago my Mum was diagnosed with Alzheimers and moved her to a bungalow nearer to me. My Mum could not afford the bungalow so she paid for 40% of it , my sister paid for 40% and I paid 20%. My sister and I care for Mum 100%. She stays in the bungalow with my sister 50% of the time and with me 50% of the time. Eventually I would like to buy my sister out of the bungalow when Mum is no longer with us but I was not sure if I would have to pay stamp duty when I purchase/inherit the remaining 80% of the property. The property cost £124, 950 when we bought it. Any advice would be welcome. Cheers .

so you will inherit a further 20% (ie presumably mum is not disinheriting sis so mums share of 40% will be split between you and sis). That transaction is not subject to SDLT

So after mum's death you would own 40% and sis would own 60%

if you then buy out sis's 60% and pay her cash (either funded from savings or via a mortgage) that transaction almost certainly will be liable for the higher rate SDLT since it would be a third property for you and a 60% share would certainly be more than the £40,000 threshold for higher rate SDLT.

booksurr

DTDfanBoy wrote: »

if you didn't own the BTL it wouldn't be.

seems you also have misunderstood - it is nothing to do with whether the property is a BTL

diper123 currently owns 2 properties. If he inherits only a part share of another and then has to buy out the other share from this sister that latter action counts as him purchasing an additional property

if he sold the BTL he would still end up with an additional property, the one he lives in currently, and the remaining 60% share of the one he inherited. The only way he can avoid SDLT is to be given the mother's old house in full for nil consideration, eg: his sister donates the whole of her share to him for nothing. A somewhat unlikely scenario!

DTDfanBoy

booksurr wrote: »

seems you also have misunderstood

Well it seems that HMRC shares my misunderstanding of the situation :cool:

3.12 The interest held at the end of the day must be an interest in another dwelling. A further interest owned in the same dwelling in which a major interest has been purchased will not, on its own, cause Condition C to be met.

silvercar

LisaLou1982 wrote: »

It wouldnt have mattered OP. We are in a v similar position, but not married and we are also subject to the additional SDLT

You shouldn't be. For unmarried people, Person A already owning a property and person B buying a property in their sole name, person B wouldn't be subject to extra SDLT.

Whether person B moves in with A or not is irrelevant to the SDLT, though it may trigger a CGT liability on the sale of their let property.

kinger101

DTDfanBoy wrote: »

Well it seems that HMRC shares my misunderstanding of the situation :cool:

3.12 The interest held at the end of the day must be an interest in another dwelling. A further interest owned in the same dwelling in which a major interest has been purchased will not, on its own, cause Condition C to be met.

They haven't. The person who posed the question has a major interest in two other properties. Therefore, by increasing their share of a third property, they are liable for SDLT if the other conditions are met. The actual text taken from the Finance Bill is;

(4) Condition C is that at the end of the day that is the effective date of the transaction—
(a) the purchaser has a major interest in a dwelling other than the purchased dwelling
(b) that interest has a market value of £40,000 or more, and
(c) that interest is not reversionary on a lease which has an unexpired term of more than 21 years

I think it's just a case of the HMRC's explanatory notes being more garbled than the actual legislation.