Stamp Duty - 40% share of a £600,000 property

deedee88

Hello,

I will be purchasing 40% (£240,000) of a £600,000 property in London through shared ownership as a first time buyer.

Can anyone advise if I will have to pay stamp duty? I am unsure as the percentage I am buying is under the threshold but the full property value is over...

Thanks
Helen

ArchtiectBOX

Yes, your solictior

agrinnall

The previous suggestion is probably best in order to get tailored advice. But you could read this, and make a decision based on whether (and when) you intend to staircase to increase your ownership percentage.

https://www.gov.uk/guidance/sdlt-shared-ownership-property

00ec25

deedee88 wrote: »

Hello,

I will be purchasing 40% (£240,000) of a £600,000 property in London through shared ownership as a first time buyer.

Can anyone advise if I will have to pay stamp duty? I am unsure as the percentage I am buying is under the threshold but the full property value is over...

Thanks
Helen

you will have to pay SDLT

there is a special rule re FTB SDLT and shared ownership. See Chapter 6 page 10:
https://www.gov.uk/government/publications/stamp-duty-land-tax-relief-for-first-time-buyers-guidance-note
"Shared ownership
Relief can only be claimed in respect of the grant of a shared ownership lease or the declaration of a shared ownership trust where “market value” treatment applies. In such a case relief applies as usual to the relevant consideration under that treatment. Where “market value” treatment does not apply or has not been opted for, relief cannot be claimed in respect of any of the transactions involved in shared ownership schemes."

if you make a market value election
That means the 600k value (technically the "lease premium"), but as that is above the 500k limit for London FTB, then SDLT is charged on the "full" rate as you are not eligible for the FTB relief. The amount of SDLT due is:
on the first 125k = £0
between 125 - 250k = 125 x 2% = 2,500
between 250 - 600k = 350 x 5% = 17,500
total SDLT payable £20,000

if you do NOT make a market value election (u elect for the staircase method)
you cannot claim the FTB relief (see quote above)
so you pay SDLT on the 40% purchased as that is above the normal 125k threshold, so with a 240k "lease premium" you'd pay:
on the first 125k = £0
between 125 - 240k = 115 x 2% = 2,300
total SDLT payable £2,300 EDIT + see the very valid excellent spot from Lunchbox in the next post re SDLT on a "high" annual rent.
This is done as a separate calculation and, if it results in you having an SDLT liability on the rent, you will need to add it to that due on the lease premium. SDLT on rent will only arise if the net present value of the rent is itself above 125k, and you do have to "go some" to get a high NPV, as it really needs a combination of a short lease and a high rent

obviously under the staircase method you are gambling that if/when you reach 80% ownership the extra SDLT payable at that point will be less than 20k in total had you paid it all upfront in one go

surprised you were unable to google this yourself?
https://www.gov.uk/stamp-duty-land-tax/residential-property-rates

https://www.gov.uk/guidance/sdlt-shared-ownership-property

the best advice would be to make sure your conveyancer/solicitor is experienced in shared ownership as many do not normally deal with such properties and don't know the specifics of what they entail

Lunchbox

With a property of that value it’s highly likely you will need to pay SDLT on the rent you are paying on the unowned share. We weren’t told of this until we got our completion statement - the initial estimate from our solicitor was incorrect, so do check this.

SDLT_Geek

Excellent analysis by 00ec25 above. I spent a happy evening getting to grips with how the SDLT treatment of staircasing transactions works. The HMRC guidance is a start, but could be clearer. I had to read the legislation, in Finance Act 2003 Schedule 9 to really understand it.


It still seems odd to me that:


(a) if deedee88 later staircases (perhaps in stages) up to 80%, no SDLT is ever due on those payments (to get from 40% to 80%) though, as an aside, they are "taken into account" if staircasing goes beyond 80% because of the linked transactions rules and so increase the SDLT on the payments made to go beyond 80%.


but


(b) if deedee88 later staircases in a single step beyond 80% then the whole payment made to get beyond 80% is liable to SDLT.


Also it is odd that the initial payment for the first 40% is treated as "linked" to later payments going beyond 80% (so increasing the SDLT on those later payments), but for leases granted after 12 March 2008 the linking does not work the other way; so no more SDLT is due on the initial payment on account of the later staircasing.

00ec25

SDLT_Geek wrote: »

It still seems odd

don't know your background, but since when has taxation ever been even ?

Not sure what HMRC bits you looked at but do appreciate the stuff on .Gov is dumbed down for Joe Public's consumption (confusion?); so always worth checking the staff manuals as well https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm27000
:beer:
those are indeed "The Rules" for staircasing and, as you yourself show, many solicitors won't have dealt with them before if their main client base is "normal" conveyancing and so won't be familiar with them