Additional 3% SDLT for parents not on title deed?

aroominyork

A simple one, I think. If we pay towards a child's house purchase and own a share of the house which is shown on a declaration of trust - but where our names are not on the title deed - is the additional 3% stamp duty payable for our share of the property?

da_rule

No, only if you are listed as a proprietor rather than being the holder of a charge.

aroominyork

Is being a priorietor the same as being named on the title deed?

da_rule

The proprietorship register is part of the title register (the electronic version of 'deeds'). This part lists all those that own the property. It is only if a name appears on this part of the register on two separate properties that the higher rate stamp duty may apply.

If you register your interest (a loan), you will appear as a charge holder in the charges register (same as a mortgage lender).

Of course, a Deed of Trust can't be registered at all so if that's the route you're going down then there isn't a problem. Although you can put a restriction on the title.

Keep_pedalling

Are they getting a mortgage for this purchase?

booksurr

aroominyork wrote: »

A simple one, I think. If we pay towards a child's house purchase and own a share of the house which is shown on a declaration of trust - but where our names are not on the title deed - is the additional 3% stamp duty payable for our share of the property?

as long as your reference to "own a share of the house" is you using language out of context then you will not be liable to the higher rate

if your payment towards the house is in the form of a loan which is repayable by your child at some future date and you have simply secured that loan using a DoT then you do not have an interest in the property itself for SDLT purposes

if however, you mean that the DoT establishes that you will get x% of the eventual sales value of the property (ie you get both your capital back and a share of any increase in the property's value) that means you have a beneficial interest in the property and the higher rate SDLT might apply depending on the exact wording of the DoT. I would advise you check with your solicitor to ensure the DoT does what we all assume it does, ie nothing more than secure your loan.

SDLT can be charged on those with a beneficial interest as well as those with a legal interest. It is not always as simple as whose name is down as legal owner.

I appreciate this is not your scenario but be aware of the issues around declaration (deed) of trust - see Example 19
Mr and Mrs M are helping their son buy his first property by providing the deposit for a flat which will be his main residence. Mr and Mrs M currently own just one property, the family home. Due to the bank’s lending criteria they require Mrs and Mrs M to be a party to the mortgage and be on the deeds of the property. On the same day as the purchase a deed will be executed which will provide that Mr and Mrs M have no interest in the property and that their son has full beneficial interest in the property. The higher rates will not apply because Condition C is not met

aroominyork

booksurr wrote: »

if however, you mean that the DoT establishes that you will get x% of the eventual sales value of the property (ie you get both your capital back and a share of any increase in the property's value) that means you have a beneficial interest in the property and the higher rate SDLT might apply depending on the exact wording of the DoT. I would advise you check with your solicitor to ensure the DoT does what we all assume it does, ie nothing more than secure your loan.

We do intend to receive the capital gain on our share when the house is subsequently sold or when our share is bought out so it seems there are beneficial owndership issues. But I went to the source of Example 19, the November 2016 guidance note, and see that it does not apply where the chargeable consideration is below £40,000. So if we plan to loan/invest £75,000 can we avoid higher rate SDLT if my wife and I each - and on paper separately - invest £37,500?

booksurr

aroominyork wrote: »

So if we plan to loan/invest £75,000 can we avoid higher rate SDLT if my wife and I each - and on paper separately - invest £37,500?

check with your solicitor

in principle a married couple is treated as one "unit" so no, I do not think you can claim those as individual shares. You would be treated as one couple owning £75K beneficial interest.

also, as you intend to make a gain from the property and crucially you have beneficial interests, you will have to account for Capital Gains Tax when it is sold. However, in that case, you DO have individual shares so the gain can be split between you and your wife (assuming the Declaration of trust is worded such that you each have identifiable shares - even if that is simply "joint" ie 50/50) and you can each claim your own CGT allowance to offset your individual gains

aroominyork

And a related question... we will also receive rent income on our share of the property, which of course will be taxable. Since this will be a joint investment between me and my wife, we will presumably each be liable for half the income tax. Is that correct, and how is it affected by whose bank account receives the rent, ie does the taxman accept all rent being received by my bank account but each of us declaring half?

booksurr

aroominyork wrote: »

And a related question... we will also receive rent income on our share of the property, which of course will be taxable. Since this will be a joint investment between me and my wife, we will presumably each be liable for half the income tax. Is that correct, and how is it affected by whose bank account receives the rent, ie does the taxman accept all rent being received by my bank account but each of us declaring half?

what a great pity you have wasted people's time by not stating the full facts at the outset

if you receive income then your beneficial interest means the whole purchase price is liable for higher rate SDLT. End of.

rental income is split 50/50 for a married couple if they are both owners of the property from which the rent originates, unless they:
a) own as tenants in common with unequal shares supported by a declaration of trust evidencing the differential split; and
b) register a Form 17 declaration with HMRC

what bank account the cash ends up in is irrelevant

aroominyork

booksurr wrote: »

that means you have a beneficial interest in the property and the higher rate SDLT might apply depending on the exact wording of the DoT

Sorry for not giving full info at the outset. booksurr, how does your earlier advice re beneficial interest might apply - which you did not mention would be on the full purchase price of the house - align with rental income creating a beneficial interest which would make the whole house liable for +3%? Are there different types of beneficial interest?