2nd Property? - Stamp Duty

dcrep

Slithery wrote: »

As a (very) rough calculation, assuming your share is %50 then your CGT bill when you dispose of the property (even if giving it to family) would be around £20k-£40k depending on your tax status.

Any idea if I can just declare a nominal 99%/1% split to reduce the amount (or something like that)?

00ec25

dcrep wrote: »

Thanks 00ec25! Hadn't thought much about CGT.
I'm assuming there's no CGT if I plan to hand the property over to my family member? We're not planning to sell it...

selling for cash is not what defines a trigger for disposal for CGT purposes. being removed from the deeds as an owner is a disposal whether by way or sale for cash to a stranger or your brother or by way of gift for £0 to a stranger or your bestest mate or other relative.

dcrep wrote: »

Any idea if I can just declare a nominal 99%/1% split to reduce the amount (or something like that)?

facts are needed...

also please remain focused on your objective: amount of what?

do you or do you not want to pay:
- more SDLT and less CGT
or
- less CGT and more SDLT

They split up and the property is now held jointly in our names.

jointly owned is meaningless.

either you own as joint tenants and therefore 50/50

or you own as tenants in common and therefore a) may or may not have a 50% share and b) could alter the share

b) will not remove the SDLT exposure on the new house unless your share is <£40,000 by property value

my relative

please confirm if your "relative" is one of those listed here as being a connected person ...
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14580

marliepanda

dcrep wrote: »

About £65K value in Jun 1998 when it came in our joint possession (when I was added). I'm seeing current values around £275K.

As mentioned before, I'm not really planning to gain/leverage on this increase, but trying to get as much advice/tips/be forewarned as I can...before I proceed.

So your relative and your flat should have at least £210k equity, nice one.

Why don’t they remortgage to give you £105k plus?

dcrep

Yes, the relative is definitely a connected person under TCGA92/S286 (2).

I guess my hope was to remove my name from the mortgage and become a first time buyer on the new property in my name alone. Hoping that would reduce my SDLT exposure on the new house.
Sorry 00ec25, the CGT added a surprising mix and not a nice one

My relative and I are joint tenants on the property.

I already have a deposit for a new property, but the amount needed for a new house becomes so much less after the CGT/SDLT

I'm a higher rate tax payer.

Tom99

dcrep wrote: »

Any idea if I can just declare a nominal 99%/1% split to reduce the amount (or something like that)?

[FONT=Verdana, sans-serif]Changing from 50/50 to 99/1 will still be a disposal for CGT purposes as far as the flat is concerned but will remove the 3% higher rate on the purchase if it is just you buying.[/FONT]

00ec25

dcrep wrote: »

My relative and I are joint tenants on the property.

so you cannot alter the "share" you own since you each own 100% of the property

the difference between JT and TIC is in a JT the property is not held in defined shares. Legally a JT is indivisible. You would need to convert your ownership to TIC (both of you obviously) and only then can the respective shares holdings be altered

dcrep wrote: »

I already have a deposit for a new property, but the amount needed for a new house becomes so much less after the CGT/SDLT

I'm a higher rate tax payer.

so it may be worth you spending some £ on professional advice from a solicitor and/or accountant to examine whether you can claim that you are not a beneficial owner of the flat. CGT is based on who is the beneficial owner, not who is the legal owner.

You may for example possibly be able to concoct a scenario whereby your name ended up as joint tenant merely to enable your relative to continue living there because of their own financial circumstances, eg, you are/were their mortgage guarantor?

Ultimately that would probably require a certain amount of "creative" writing to produce a (retrospective) deed of trust establishing that you were, and are not, entitled to any money whatsoever from the disposal of the flat, but since you intend to gift it anyway such "loss" should not be a great hardship for you

AnotherJoe

dcrep wrote: »

Yes, the relative is definitely a connected person under TCGA92/S286 (2).

I guess my hope was to remove my name from the mortgage and become a first time buyer on the new property in my name alone. Hoping that would reduce my SDLT exposure on the new house.
Sorry 00ec25, the CGT added a surprising mix and not a nice one

My relative and I are joint tenants on the property.

I already have a deposit for a new property, but the amount needed for a new house becomes so much less after the CGT/SDLT

I'm a higher rate tax payer.

Eh? Why a glum face if the amount you need for a new house is less?


If you've paid £40k CGT thats because you also have a gain of £60k after you've paid that!



So you'll have £60,000 extra you can put towards your new house.

dcrep

AnotherJoe wrote: »

Eh? Why a glum face if the amount you need for a new house is less?


If you've paid £40k CGT thats because you also have a gain of £60k after you've paid that!



So you'll have £60,000 extra you can put towards your new house.

I may have been misleading with my words...
I'm thinking, for example, I have £125K cash that can be used to purchase a new home.
With £35K SDLT that means it decreases to a £90K deposit.
If I were looking to leverage money from the flat with my relative then gain is correct.
But at the moment I'm hoping to just extract myself and continue and buy my 'first' house.

If I've misunderstood then please help me to clarify...

SDLT_Geek

00ec25 made the good point that it: "may be worth you spending some £ on professional advice from a solicitor and/or accountant to examine whether you can claim that you are not a beneficial owner of the flat. CGT is based on who is the beneficial owner, not who is the legal owner."


SDLT is also based on beneficial ownership. I see that you do not expect now to share in the increase in value of the flat owned by your relative. So I wonder if all along the arrangement was that (although your "name" was on the title, and although you were jointly liable on the mortgage) the full beneficial ownership was held on trust for your relative?


That would be consistent with your relative having put in all of the equity (is that right?) your relative having made the mortgage repayments and your relative having received all the rent (is that right?) and accounted for tax on it (is that the case?).


A declaration of the trust at the time might have set out the position clearly.


If you never had a beneficial interest in the flat then the tax position (both cgt and SDLT) is entirely different from a case where you had a share in the property.

dcrep

Thanks SDLT Geek.
I think I'll get some professional advice as you and 00ec25 have mentioned.
Correct. My name is on the title, but all along expected the relative to benefit.
They put in all the equity on initial purchase. They make and still do all of the repayments.

Didn't realise you could set up a trust for this sort of thing. Appreciate the heads up.

The beneficial interest side is what me and the relative had intended.

As an aside, I've found I have to be prepped before speaking to accountants. Sometimes pointing them in the right direction. I know some are better than others though. My experience has been with an accountants for IT consultancy. This feels outside their area of expertise.