Legitimately avoiding buy to let stamp duty surcharge?

tenorion1

Hi everyone. Would really appreciate your advice on this! Here's the deal:

- I am currently living in rented accommodation and have never owned my own home
- I have a 1/4 share of a property that was gifted by my parents when they moved out but whilst it still counted as their primary residence. They retain a 1/4 share along with my siblings. Since then the property has been let out. There is no mortgage on the property, and my share is worth more than £40,000.

I am thinking about buying a home, and I have realised that (as far as I understand the rules), I will need to pay the buy to let stamp duty surcharge on any property I buy, even though I am buying my own residence, as I am not disposing of one.

What I am wondering is this - if I were to gift my share of the property to one of my siblings, pay the capital gains due on my share, and then transfer back after my property purchase went through, would this then fall outside the stamp duty surcharge?

My assumptions:
- It makes sense to transfer to a sibling rather than my parents in order to avoid re-setting the 'potentially exempt transfer' clock.
- Transferring to a sibling does not incur SDLT because there is no 'consideration' and no mortgage on the property.
- I will need to pay capital gains on the difference in value of my 1/4 share since we were gifted the property and it's current market value.
- When my sibling gifts the property back to me, there will be no SDLT due (still no 'consideration') and no capital gains of significance (assuming market values do not shift crazily).
- Paying the capital gains tax isn't quite 'lost' money like SDLT in that if we ever sold the property, I would not pay the gain again.

I intend to seek professional advice to confirm this, but would really appreciate someone picking holes in it here if you spot any!

Guest101

tenorion1 wrote: »

Hi everyone. Would really appreciate your advice on this! Here's the deal:

- I am currently living in rented accommodation and have never owned my own home
- I have a 1/4 share of a property that was gifted by my parents when they moved out but whilst it still counted as their primary residence. They retain a 1/4 share along with my siblings. Since then the property has been let out. There is no mortgage on the property, and my share is worth more than £40,000.

I am thinking about buying a home, and I have realised that (as far as I understand the rules), I will need to pay the buy to let stamp duty surcharge on any property I buy, even though I am buying my own residence, as I am not disposing of one.

What I am wondering is this - if I were to gift my share of the property to one of my siblings, pay the capital gains due on my share, and then transfer back after my property purchase went through, would this then fall outside the stamp duty surcharge?

My assumptions:
- It makes sense to transfer to a sibling rather than my parents in order to avoid re-setting the 'potentially exempt transfer' clock.
- Transferring to a sibling does not incur SDLT because there is no 'consideration' and no mortgage on the property.
- I will need to pay capital gains on the difference in value of my 1/4 share since we were gifted the property and it's current market value.
- When my sibling gifts the property back to me, there will be no SDLT due (still no 'consideration') and no capital gains of significance (assuming market values do not shift crazily).
- Paying the capital gains tax isn't quite 'lost' money like SDLT in that if we ever sold the property, I would not pay the gain again.

I intend to seek professional advice to confirm this, but would really appreciate someone picking holes in it here if you spot any!

Why do you think there's no consideration??

tenorion1

I think there's no consideration on the property I own 1/4 of, because no money will change hands when I gift it to my sibling and back again.

There will definitely be consideration of the property I am purchasing for my own home and expect to pay SDLT on that, just hopefully not the buy to let surcharge aspect! Thanks

marliepanda

tenorion1 wrote: »

I think there's no consideration on the property I own 1/4 of, because no money will change hands when I gift it to my sibling and back again.

There will definitely be consideration of the property I am purchasing for my own home and expect to pay SDLT on that, just hopefully not the buy to let surcharge aspect! Thanks

It's not a buy to let surcharge.

It's a second property (and third, fourth...) surcharge.

Guess how many properties you will own? Two! Bingo.

You can't avoid it. HMRC aren't daft. They'll see your little giving and refitting of the property for exactly what it is. Pay up.

silvercar

The hole in your argument:

- Transferring to a sibling does not incur SDLT because there is no 'consideration' and no mortgage on the property.

Siblings are considered 'related parties' and any transaction is deemed to have take place at market value, even if no money changed hands.

tenorion1

Fair enough folks - thanks for your input! The only reason I started looking more into this is I was surprised to be caught by the tax in the first place, as I still considered myself a first time buyer. The tax appears to advantage those already on the property ladder (i.e. those already owning their own home and a BTL property). I know I am still very fortunate to have any foot on the property ladder rung!

SuzieSue

silvercar wrote: »

The hole in your argument:



Siblings are considered 'related parties' and any transaction is deemed to have take place at market value, even if no money changed hands.

Yes, for Capital Gains tax purposes but not for stamp duty.

But you still need to find out if you will be deliberately be evading SDLT which is illegal.

marksoton

tenorion1 wrote: »

The tax appears to advantage those already on the property ladder

So you then, non....?

xylophone

Is there any reason why the property should not be sold?

tenorion1

marksoton wrote: »

So you then, non....?

Like I said, I know I am fortunate. Perhaps it should have been phrased 'those *further* on the property ladder'. I am not complaining, but seemed worth checking if there was a way to avoid (but not evade) the tax

SuzieSue wrote: »

Yes, for Capital Gains tax purposes but not for stamp duty.

But you still need to find out if you will be deliberately be evading SDLT which is illegal.

There would be other financial reasons for wanting to transfer to siblings, and I'd be happy to not transfer it back - but definitely appears to be on dodgy ground even in that case. Thanks!

tenorion1

xylophone wrote: »

Is there any reason why the property should not be sold?

Selling would probably make this easier but it's the only exposure to the property market our family has, and the family currently living there could not afford to rent elsewhere.