Would I Be Classed as FTB for Stamp Duty?

n15h

Hi, looking for some advice for the below. Any help is much appreciated.

I am a FTB, currently privately renting and currently in the process of purchasing my first house for £200K (mortgage offer received and deed signed). Stamp duty is calculated to be £1500 but I would currently be exempt from paying this.

My parents currently own a 2 storey commercial property in Bedford (shop on ground floor, flat upstairs), and want to add my name to the property alongside theirs. I've given some context below as to why they want to do this ASAP.

My question is: if my name is added to the commercial property, would I be liable to pay SD on my first house?


CONTEXT
My parents currently reside overseas (let's call that Country A), but own the 2 storey commercial property in Bedford before they moved overseas. A new amnesty program has been introduced in Country A which require any residents to declare any foreign income earned and will grant a tax amnesty to Country A residents on all taxes, penalties and interest for the years ending on or before 31 December 2016.

The income should be declared as arising in the year ended 31 December 2016. Assets held outside Country A whose income could fall within the amnesty program include bank deposits, investment portfolios, insurance policies, shares or other property. Funds will need to be repatriated by 30 June, and any repatriation after that date will be subject to 10% penalty.

Considering the time it could take to sell the commercial property, it could take mean that the funds will not be repatriated by 30 June and my parents will be liable to pay the 10% penalty - which currently calculates to £15,000.

While my parents are happy to declare the income, they don't want to sell the property. Instead, they have been advised that by adding my name to the property they won't need to sell the property and repatriate the funds of the property sale to Country A.

I want to help my parents, but also want to ensure that I don't fall foul of any SD laws that could affect my house purchase.

Nicosy

You would definitely want the purchase of your house to go through ASAP, which sounds like the case.

To qualify as a FTB under the new stamp duty rules, you can’t:

- Have ever owned a property anywhere in the world. If you’ve ever owned any property, anywhere, any time, you’re out.
- Be buying your property as a buy-to-let.

If your house goes through prior to taking on your parents flat then you'll be liable for an extra 3%+ stamp duty tax surcharge on additional properties over £40,000. It's staggered just like stamp duty.

Additional Property price Stamp duty rate
First slice: From £40,000.01 to £125,000 3%
Second slice: from £125,000.01 to £250,000 5%
Third slice: from £250,000.01 to £925,000 8%
Fourth slice: from £925,000.01 to £1,500,000 13%
Fifth slice: over £1,500,000.01 15%

There's a really comprehensive write up on the new stamp duty rules, including for FTBs and second homes on lifetise dot com /new-stamp-duty-rates/ (won't let me post the link as a noob!)

kingstreet

Nicosy wrote: »

You would definitely want the purchase of your house to go through ASAP, which sounds like the case.

To qualify as a FTB under the new stamp duty rules, you can’t:

- Have ever owned a property anywhere in the world. If you’ve ever owned any property, anywhere, any time, you’re out.
- Be buying your property as a buy-to-let.

If your house goes through prior to taking on your parents flat then you'll be liable for an extra 3%+ stamp duty tax surcharge on additional properties over £40,000. It's staggered just like stamp duty.

Additional Property price Stamp duty rate
First slice: From £40,000.01 to £125,000 3%
Second slice: from £125,000.01 to £250,000 5%
Third slice: from £250,000.01 to £925,000 8%
Fourth slice: from £925,000.01 to £1,500,000 13%
Fifth slice: over £1,500,000.01 15%

There's a really comprehensive write up on the new stamp duty rules, including for FTBs and second homes on lifetise dot com /new-stamp-duty-rates/ (won't let me post the link as a noob!)

Although there is a £40k property value start point to the SDLT surcharge, it starts at £0, not £40k, if it should apply.

davidmcn

Nicosy wrote: »

- Have ever owned a property anywhere in the world. If you've ever owned any property, anywhere, any time, you're out.

Not "any" property - a dwelling.

Unfortunately for the OP, a mixed-use property which includes a dwelling would exclude them. But if they, for example, only had an interest in the shop, they'd be in the clear.

ReadingTim

I would suggest that if you're saving your parents £15k by adding you name to the commercial property, the least they could do would be to pay your £1.5k stamp duty for you....

pinklady21

What is the two storey commercial property? Is it flats? a shop with a flat above? or a two storey shop? or something else?
As others have said, if it is a dwelling, then it will count for Stamp Duty purposes.
I assume that your parents have checked thoroughly the rules in their own country that what they intend to do (ie sign over their property to you) does not have any other implications for you or them?

thermal2844

As an aside - how would they know if you've owned a house elsewhere in the world if there's no current mortgage running? Seems like a tall order to follow up on that, unless there's something I'm unaware of. Not that I'm advocating lying in any way - merely curious.

MrWB

thermal2844 wrote: »

As an aside - how would they know if you've owned a house elsewhere in the world if there's no current mortgage running? Seems like a tall order to follow up on that, unless there's something I'm unaware of. Not that I'm advocating lying in any way - merely curious.

For the UK probably because SDLT / Transfer forms will need to be filled in tied back to a NI number.

When they then buy a future property, the same thing will happen and the NI numbers can be tied to multiple properties.

For overseas properties, I guess through reciprocal agreements between governments? Some may get away with it, others may not - some may get away with it now but end up on fraud charges in the future?

With the advent of AI, computer learning and data warehousing, these kind of things are going to become easier to catch and more difficult to get away with, though people should be being honest in any case when they fill out the relevant forms and answer the relevatn questions.

n15h

pinklady21 wrote: »

What is the two storey commercial property? Is it flats? a shop with a flat above? or a two storey shop? or something else?
As others have said, if it is a dwelling, then it will count for Stamp Duty purposes.
I assume that your parents have checked thoroughly the rules in their own country that what they intend to do (ie sign over their property to you) does not have any other implications for you or them?

Hi, it is a shop with a flat above.

Yes, my parents have been looking into this for a while. There is some contradictory information from Country A's government about the amnesty so no one is 100% clear on what needs to happen and any implication.

I don't believe there to be any implications for me but I'll speak to a tax adviser/accountant to double check.

n15h

MrWB wrote: »

For the UK probably because SDLT / Transfer forms will need to be filled in tied back to a NI number.

When they then buy a future property, the same thing will happen and the NI numbers can be tied to multiple properties.

For overseas properties, I guess through reciprocal agreements between governments? Some may get away with it, others may not - some may get away with it now but end up on fraud charges in the future?

With the advent of AI, computer learning and data warehousing, these kind of things are going to become easier to catch and more difficult to get away with, though people should be being honest in any case when they fill out the relevant forms and answer the relevatn questions.

Yes you're right about agreements between governments. It's to do with Common Reporting Standards (CRS) signed between various countries which will let them share financial account information.

n15h

Nicosy wrote: »

You would definitely want the purchase of your house to go through ASAP, which sounds like the case.

To qualify as a FTB under the new stamp duty rules, you can’t:

- Have ever owned a property anywhere in the world. If you’ve ever owned any property, anywhere, any time, you’re out.
- Be buying your property as a buy-to-let.

If your house goes through prior to taking on your parents flat then you'll be liable for an extra 3%+ stamp duty tax surcharge on additional properties over £40,000. It's staggered just like stamp duty.

Additional Property price Stamp duty rate
First slice: From £40,000.01 to £125,000 3%
Second slice: from £125,000.01 to £250,000 5%
Third slice: from £250,000.01 to £925,000 8%
Fourth slice: from £925,000.01 to £1,500,000 13%
Fifth slice: over £1,500,000.01 15%

There's a really comprehensive write up on the new stamp duty rules, including for FTBs and second homes on lifetise dot com /new-stamp-duty-rates/ (won't let me post the link as a noob!)

I looked at the info on that website. Based on that, I've calculated SD to be £7500 i.e.

£200K property:
3% on £125K = £3750
5% on £75K = £3750


3750+3750 = 7500


That's still cheaper than £15K.. but a big chunk of savings