Higher rate SDLT

mm08ct

Hello,

Me and my wife invested £60,000 (in total between us) in an 18% share in a property through a trust receiving a share of rent. We now want to buy our first property but I'm unsure if we will have to pay the higher rate SDLT on it. The rules seem to suggest we do if we own more than £40,000 in property but I'm unsure if this is joint or each.

Thoughts appreciated!

ThePants999

Married couples are generally treated as a single unit by most aspects of the SDLT rules, so likely you will have to pay the higher rate, yes.

AnotherJoe

You must be liable because if it was each, there would be an easy out , if one person had say £60k invested, they could give half to their partner and hey presto no extra tax. Or one had £40k and one £10k, transfer a fiver from the £40k to the £10k partner.

If that type of situation was valid it would also be in the examples in the SDLT guide and they are not, and they would have to have a value of £80k for couples and £40k for single people.

00ec25

mm08ct wrote: »

Hello,

Me and my wife invested £60,000 (in total between us) in an 18% share in a property through a trust receiving a share of rent. !

when asking about tax you must be precise.
- Please confirm the exact nature of the "trust". Agreed it appears that both you and your wife have a beneficial interest in the rental income from the property, but buying into a property trust is an unusual way to "own" property, so needs confirmation of what is the trust.
- is that a residential property?
- is it held in joint names?
- did the "investment" come from a joint bank account?
- is the rental income declared 50/50 for income tax purposes?

It is a common misconception that the higher rate SDLT rules treat as married couple as a "single unit". They do not, in the sense people use that phrase.
What the rules do is say that each purchaser is considered individually and if each individual meets the criteria for higher rate then the whole purchase becomes a higher rate transaction. There is no need to give examples of x2 the 40k since that is nonsense. It is an individual who is assessed against 40k.
For a married couple where both are purchasers each spouse is assessed as an a individual in their own right.
https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09764

the only time being married is relevant is in the scenario where only one person out of the couple is the purchaser or, more relevantly in the OP's case, in examining what property interests each individual person already has. Note that is as an individual, not as a "single unit".
There is no aggregation of interests for married couples
In OP's case, if the beneficial interest of each person is 50%, then each person owns 30k, and neither person meets the higher rates criteria


if on the other hand the trust is on sole name, not joint name, or a set % is specified then the situation may be different if the 40k threshold is breached because then, and only then, do the married rules apply, the one person is assessed and it applies to both that person and their spouse.
https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09820

AnotherJoe

00ec25 wrote: »

when asking about tax you must be precise.
- Please confirm the exact nature of the "trust". Agreed it appears that both you and your wife have a beneficial interest in the rental income from the property, but buying into a property trust is an unusual way to "own" property, so needs confirmation of what is the trust.
- is that a residential property?
- is it held in joint names?
- did the "investment" come from a joint bank account?
- is the rental income declared 50/50 for income tax purposes?

It is a common misconception that the higher rate SDLT rules treat as married couple as a "single unit". They do not, in the sense people use that phrase.
What the rules do is say that each purchaser is considered individually and if each individual meets the criteria for higher rate then the whole purchase becomes a higher rate transaction. There is no need to give examples of x2 the 40k since that is nonsense. It is an individual who is assessed against 40k.
For a married couple where both are purchasers each spouse is assessed as an a individual in their own right.
https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09764

the only time being married is relevant is in the scenario where only one person out of the couple is the purchaser or, more relevantly in the OP's case, in examining what property interests each individual person already has. Note that is as an individual, not as a "single unit".
There is no aggregation of interests for married couples
In OP's case, if the beneficial interest of each person is 50%, then each person owns 30k, and neither person meets the higher rates criteria


if on the other hand the trust is on sole name, not joint name, or a set % is specified then the situation may be different if the 40k threshold is breached because then, and only then, do the married rules apply, the one person is assessed and it applies to both that person and their spouse.
https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09820

Surely you don't mean if each meets the criteria, you mean if either meets the criteria ? Because that's the test fur everything else? However, that does indeed imply the £40k can indeed be halved for a couple. I think OP needs to have a definitive answer from HMRC (as solicitors notoriously get it wrong. As it seems I may have been

SDLT_Geek

I agree with 00ec25 on the point about treating joint buyers (including a married couple) separately. If either of them would have to pay the higher rates then the transaction is liable to the higher rates.

We are looking here at Condition C (is there a property worth £40K or more that "counts against" the buyer). HMRC accept (although the legislation is not entirely clear) that the value of the "major interest" in the pre-owned property that one looks at on a later purchase is the value of the share that the person has, not the value of the whole property.

One cannot apply this logic though if one is looking at the property being bought. One does not "split up" the price / chargeable consideration for that. So four people buying a property for £140,000 cannot escape the surcharge on the basis that each will have a share worth under £40k.

mm08ct

Thankyou for the responses, most helpful. Some more info:

The trust is in both our names for 18% (rather than X 9%, Y 9%). I am in the process of paying income tax so have not yet declared it as this is the first year it is necessary. It is below the £1000 property allowance but think it will still be taxed as from a trust. The money came from, and the income goes into, a joint account. We are not on the property deeds, the trustees are.

It's irksome to think me and my wife's assets should be 'divided up' in some sense whilst we are married!