Legal loopholes for avoiding stamp duty?

Jojo_fry

I wonder if anyone on here could advise me on the legality of a potential scenario I've thought of to avoid stamp duty?


My partner has a lump sum of cash so is looking to invest in a property to rent out. He has never bought property before so he would be classed as a first time buyer if he were buying a house to live in. However, he lives with me (I part-own my flat on a shared ownership mortgage) so if we were to buy together, it would be classed as a second home and we'd have to pay stamp duty. Equally if he were to buy on the basis of a buy to let mortgage we'd also have to pay stamp duty.


However, if he were to by on his own, and take out a normal mortgage, and then get the mortgage lender's consent to let out the property, would this be a legitimate and legal way of avoiding paying the stamp duty?

Bluebirdman_of_Alcathays

Why would he be charged additional SDLT in the first place? As you are not married/civil partner, he currently owns nothing, so wouldn't pay the additional rate. It has nothing to do with BTL mortgages.

HouseBuyer77

You're not married?

Assuming he does not own a share of your property he's not purchasing a second so no extra stamp duty due.

If you are married I believe your property gets lumped in with your spouses when working out if extra stamp duty is due (to get around married couples gifting each other bits of house to end up owning two properties without paying the extra).

danslenoir

Jojo_fry wrote: »

However, if he were to by on his own, and take out a normal mortgage, and then get the mortgage lender's consent to let out the property, would this be a legitimate and legal way of avoiding paying the stamp duty?

Yes, but it is very risky to assume that it is going to easy to get consent to let, especially straight after he has purchased the property.

I imagine any lender would view such a request with some skepticism, and might well (rightly) feel justified that your boyfriend has not entirely be straight with them when applying for the residential mortgage only very shortly before.

In the likely event that the lender refuses consent to let, is your boyfriend happy to live in the property as his primary residence and cover the mortgage, bills etc himself?

If your boyfriend wants to be able to let the property out, he should really get a buy to let mortgage, but this will be very difficult without owning another property and will require a substantially larger deposit. There may be a few lenders who are willing to lend on this basis so perhaps an idea to speak to a broker if this is a route he wants to pursue.

Jojo_fry

Hi All,


Many thanks for the replies. No, we are not married and he hasn't bought any property before, it would be a first time purchase. However, looking at the stamp duty rules, it seemed to be saying that if you are buying property to let out, you have to pay stamp duty, have I misunderstood that?

Bluebirdman_of_Alcathays

Jojo_fry wrote: »

Hi All,


Many thanks for the replies. No, we are not married and he hasn't bought any property before, it would be a first time purchase. However, looking at the stamp duty rules, it seemed to be saying that if you are buying property to let out, you have to pay stamp duty, have I misunderstood that?

Yes you have - the rules don't say that at all. The tax is on owning more than one property. As he will only own one, there will be no additional SDLT to pay.

HouseBuyer77

it seemed to be saying that if you are buying property to let out, you have to pay stamp duty, have I misunderstood that?

Stamp duty is always due (regardless or BTL/Residential/Second property etc). What changes is how much is due. Second properties incur an extra 3%.

Jojo_fry

Ah ok, so the higher rate ONLY applies if it's an additional property. But what about if we were to apply for the BTL mortgage jointly, would that throw a spanner in the works because I have a share of a property already? We'd like to buy as a joint venture really but I'm not sure whether that just makes things more difficult.

Bluebirdman_of_Alcathays

Yes - if you purchase together, then the additional rate would apply.

HouseBuyer77

But what about if we were to apply for the BTL mortgage jointly, would that throw a spanner in the works because I have a share of a property already?

As I understand it this would mean you'd owe the extra 3% stamp duty.

booksurr

Jojo_fry wrote: »

Ah ok, so the higher rate ONLY applies if it's an additional property. But what about if we were to apply for the BTL mortgage jointly, would that throw a spanner in the works because I have a share of a property already? We'd like to buy as a joint venture really but I'm not sure whether that just makes things more difficult.

if you buy as joint owners then yes the higher rate becomes due since each owner is assessed as an individual person and the higher rate applies if one of them already owns a property

the exception is where the purchasers are a married couple. then they are treated as a "single unit" not as two individuals

please read the guide as all your questions have been answered many times already
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/509184/GuidanceNote_Final.pdf