share in son's property - stamp duty?

Adlibjac

I'm hoping to pick the brains of a tax expert here as we are so confused.....

My son is hoping to buy a home but needs a bit of help.

My plan would be to buy a share of his home with him as an investment until he can afford to buy me out.

I would be planning to buy a 15% share of the property for an amount of £38000. The legal side of this has been discussed with a solicitor and we are all happy.

However, the solicitor reckons we would be liable for extra 3% stamp duty on the whole purchase price of this property as I already own a home.

But....I have found information online (government website and zoopla) which seems to say that stamp duty is not payable at higher rate if the 2nd home owner owns less than £40000 consideration in the property?

Solicitor does not think this applies in this case. is that true? Who is right?

I tried to telephone HMRC but gave up the will to live after an hour.

I can't just gift the money to son for various reasons. This seemed like a good alternative for me and I have done it before but that was before the extra stamp duty situation.

Can anyone help please?

glentoran99

Adlibjac wrote: »

I'm hoping to pick the brains of a tax expert here as we are so confused.....

My son is hoping to buy a home but needs a bit of help.

My plan would be to buy a share of his home with him as an investment until he can afford to buy me out.

I would be planning to buy a 15% share of the property for an amount of £38000. The legal side of this has been discussed with a solicitor and we are all happy.

However, the solicitor reckons we would be liable for extra 3% stamp duty on the whole purchase price of this property as I already own a home.

But....I have found information online (government website and zoopla) which seems to say that stamp duty is not payable at higher rate if the 2nd home owner owns less than £40000 consideration in the property?

Solicitor does not think this applies in this case. is that true? Who is right?

I tried to telephone HMRC but gave up the will to live after an hour.

I can't just gift the money to son for various reasons. This seemed like a good alternative for me and I have done it before but that was before the extra stamp duty situation.

Can anyone help please?

did it definitely say that or did it say the property value is less than £40000. Have you got the link,


I think what you are referring to though is if you already owned a share in a property of less that £40000

00ec25

it appears you will be a joint purchaser with your son?

as such the chargeable consideration is the purchase price for the entire property, it is not split into your share and his share. You are not buying a share FROM your son, you are buying the property together with your son from its vendor for the agreed purchase price. Therefore, as you already own a property, the higher rate SDLT will apply to the whole purchase price

see extracts below from the guide:
https://www.gov.uk/government/publications/stamp-duty-land-tax-higher-rates-for-purchases-of-additional-residential-properties

3.42 page 15
Where a transaction is entered into by joint purchasers the higher rates will apply if the transaction would be a higher rates transaction for any of the purchasers considered individually. So if there are two individual purchasers and Conditions A to D are all met for one of them only, the transaction will be charged at the higher rates.

3.43 This rule applies whether an interest in a dwelling is purchased as joint tenants or tenants in common. It does not matter how small the interest of a particular purchaser is, the test is applied in the same manner.

Condition A
The £40,000 is not an allowance or a 0% tax band, if the chargeable consideration is equal to or more than £40,000 then the relevant higher rates apply to the whole chargeable consideration.


Q21 page 29
I am helping my son purchase a property that will be his main residence. My son is a first time buyer but I own another property which is the family’s main residence. I will have a 30% share in the property and my son a 70% share. Will we have to pay the higher rates of SDLT?

A21. Yes, the higher rates will apply as following the purchase you will own an interest in an additional residential property and will not have replaced your main residence.

Adlibjac

Argh that's painful but thank you for your very detailed and clear reply.

It looks like we will just have to swallow several thousand extra in costs and hope to make some capital gains to ease the pain.

00ec25

Adlibjac wrote: »

Argh that's painful but thank you for your very detailed and clear reply.

It looks like we will just have to swallow several thousand extra in costs and hope to make some capital gains to ease the pain.

indeed, but don't forget your "investment" will be subject to Capital gains tax if/when your son sells the property (he will be exempt) or when you sell your share to your son.

in case you do not yet know how CGT works then it is based on shares. But, as he is your son he is a "connected person" so it is not based on the price he pays you, instead it is based on your share of its total market value.