Second Property - SDLT return

davidmcn

sb53812 wrote: »

I am considering doing nothing and then writing to HMRC after to completion to inform them of the situation and that I need to pay the additional tax. In this way, it would avoid the housing association being aware of the second property and pulling out.

Why do you think the housing association would become aware if you declare it on your SDLT return in the first place? They don't see your SDLT return.

sb53812

davidmcn wrote: »

Why do you think the housing association would become aware if you declare it on your SDLT return in the first place? They don't see your SDLT return.

Because my solicitor who also acts for the lender would see it, and so would flag it with the lender, who would then probably refuse to lend as I am not entitled to shared ownership. My solicitor also has a lot of work referred from the HA, so would probably opt to disclose it to them immediately as well.

Ozzuk

I think you are wrong in this instance Booksurr - my first question was who owns the house. This is because the OP clearly states his mother did it to avoid tax issues.

To me that means she has/had no intentions whatsoever of not really owning the house.

Signing a legal document then claiming innocence of youth is hardly a defence - though I can see how someone would trust a mother!

And yes, the OP may own the house in a legal sense but it 100% clear he doesn't really own it, there was never an intention for him to own it. Could he retain it? I don't know, probably but as he admits it would destroy the family.

So it is a mess, you need legal advice and I really do think your mother has put herself in a very bad position.

Just to explain what I mean further - posters are right he may legally 'own' the property - but can you seriously imagine him saying to his mum ' ha its mine now nothing you can do about it'. No, of course not. Sure, his mum could give up her claim - in which case it does become his completely.

Not wishing to take us too far off tangent but I'm sure there was a case recently (the famous hay bale house) where someone claimed ownership because title was transferred but it was overturned when it was clear that was never the real intention. I could be wrong on this.

booksurr

Ozzuk wrote: »

I think you are wrong in this instance Booksurr - my first question was who owns the house. This is because the OP clearly states his mother did it to avoid tax issues.

using a variation to a will is a very common tactic in IHT planning whereby deceased person A leaves something to B in a will, but the variation means that in fact C inherits it direct from A. The usual reason for doing so is to ensure it never enters the estate of person B, and so is not at risk of suffering IHT when B dies and leaves it to C. Therefore avoiding "double" taxation of the same asset, once as part of A's estate, and secondly as part of B's estate, when all along it is C who is the youngest and therefore going to be the last person left alive to enjoy the asset anyway.

of course there are many other reasons why mother may not have wanted an asset in her name, we could for example, speculate that she is evading benefit fraud by making sure the asset is not in her name so is not part of her capital and this does not impact whatever means tested benefit she is claiming? All pure speculation...

I assume you are alluding to the beneficial ownership, as distinct from the legal ownership? If mother does in fact still "control" the property, ie mother retains all rights to benefit from any income produced by letting the property or takes (in full) any profit from its sale, then it can be argued she is the beneficial owner.

it is perfectly OK to separate legal and beneficial owners, however, OP has already confirmed that he is the legal owner as that is what his mother did to him - she gave up her inheritance in favour of him having it. On the info provided so far it is unlikely that there is evidence mother is the beneficial owner, ie there is no documented declaration of trust in place, but that can be easily rectified.

if we now work on the basis that she remains the beneficial owner then...

1) as legal owner the OP could be acting as bare trustee on behalf of his mother's beneficial ownership. Where the legal owner is not the beneficial owner, the beneficial owner is held to be the person with the major interest in the property. Since mother is not party to the purchase of the SO house, then she has no SDLT liability. The OP, as the bare trustee for his mother, is NOT deemed to be buying an additional property, since the major interest is held by his mother, not by him. So OP would not have to pay the higher rate SDLT

2) as beneficial owner, mother is the person exposed to CGT, not the OP he is merely the legal owner.

3) I have no idea whether claiming a status of bare trustee on behalf of mother would mean OP can still claim FTB status in the eyes of the housing association.

booksurr

sb53812 wrote: »

In terms of telling HMRC after I have completed, this is exactly what I would have done if my mother hadn't told me what she'd done until later down the line. It is a question of tactically delaying my disclosure in order to be able to complete the purchase. I appreciate this is not the best thing to do morally/legally but I am trying to continue purchasing my first property and circumnavigate the mess my mother has created as best as I can.

1. you will need to lie to your solicitor when he asks you "do you own another property" That act would be deliberate fraud

2. your name will go down as owner of the SO house. The land registry will report that to HMRC. HMRC computers will match your new ownership with the fact you also own another property. HMRC will be notified you have just purchased an additional property but have not paid higher rate SDLT. HMRC may take some time to act, but they will come after you eventually, the whole point of taxing property is it is rather hard to hide! At which point if they decide you did it deliberately then you will suffer considerably higher penalties than if you make a voluntary declaration and inform them before they find out

3. stop deluding yourself about "tactical delay". You deliberately plan to lie and hope to sort out the mess later by trusting that no one regards your actions as fraud and thus penalises you. Do you have a prediction for the 3:30 race at Kempton Park as you are obviously a gambler?

you should talk to your solicitor to sort out beneficial ownership as that potentially offers a better way out ....

sb53812

Thanks Booksurr I appreciate the advice. On reflection I definitely don't want to deliberately commit fraud so I will look at arranging a declaration of trust. I am also considering just transferring it over to my mother as I think she will agree to this despite any tax impact it might have on her.

Is there likely to be any tax payable by me if I transfer it to her for £0, baring in mind it was inherited? Or would I have to have a valuation for tax purposes carried out to assess the change in value?

Thanks

glentoran99

no-one else seems to have mentioned, but as you already own a house you are and never will be again a "first time buyer" so I don't see how you can get the shared equity scheme

sb53812

glentoran99 wrote: »

no-one else seems to have mentioned, but as you already own a house you are and never will be again a "first time buyer" so I don't see how you can get the shared equity scheme

The entitlement rules have changed recently so that you do qualify if you previously owned, but as long as you do not currently own.

xylophone

She transferred it in to my name (directly from my great grandfathers estate) for tax reasons

What tax reasons?

Even had the idea been that the OP were a nominee or bare trustee, if the beneficial ownership stayed with the mother, then any tax due or payable would still be assessed on the mother.

There would therefore be no tax saved or avoided?

If there was a Deed of Variation such that the house went to the OP rather than to his mother, then there is no question that he is both the legal and beneficial owner of the property.

If there was no DoV but the mother transferred a house that she had accepted as a bequest as a gift to the OP, then the OP is the legal and beneficial owner.

If the OP transfers it back, he could be deemed to be making a gift to his mother.

There could be CGT implications for one or both and there could be IHT
implications for the estates of both.

In the OP's position I would be contacting a solicitor immediately and taking advice.