Buy to let/stamp duty scenario

Rkd1989

Hi all, first time poster having used the forums for valuable information over the years.

I'm looking for information/advice regarding the title having used the search function without finding the required information to my situation.

I bought a house in 2014 in my own name. I then had my partner move in with me where we lived up until August 2018. Due to a job change, relocation is a must and will suit both of us hence both of us moving back to our parents to save up a significant amount of money in a short space of time to buy another place. I let my own home out (all above board through agency/mortgage provider consent etc) rather than selling with the view to buying another place and paying the 3% stamp duty on a BTL as required by HMRC.

However, after conflicting conversations with 'experts', it seems that since we are NOT married, buying a home in my partners name only would see us avoid the 3% charge. Is this definitely the case? Add in the issue of us being engaged, due to marry July 2020, it's a fairly complicated scenario for us and we're not entirely sure what to do. Obviously avoiding paying 3% would be financially advantageous to us. Morally, doing this is questionable but if we weren't doing anything wrong from a legal standpoint, we'd be happy to go ahead with her buying in her own name meaning owning one property each.

We are also based in Scotland.

Thanks in advance.

Pixie5740

Rkd1989 wrote: »

Hi all, first time poster having used the forums for valuable information over the years.

I'm looking for information/advice regarding the title having used the search function without finding the required information to my situation.

I bought a house in 2014 in my own name. I then had my partner move in with me where we lived up until August 2018. Due to a job change, relocation is a must and will suit both of us hence both of us moving back to our parents to save up a significant amount of money in a short space of time to buy another place. I let my own home out (all above board through agency/mortgage provider consent etc) rather than selling with the view to buying another place and paying the 3% stamp duty on a BTL as required by HMRC.

However, after conflicting conversations with 'experts', it seems that since we are NOT married, buying a home in my partners name only would see us avoid the 3% charge. Is this definitely the case? Add in the issue of us being engaged, due to marry July 2020, it's a fairly complicated scenario for us and we're not entirely sure what to do. Obviously avoiding paying 3% would be financially advantageous to us. Morally, doing this is questionable but if we weren't doing anything wrong from a legal standpoint, we'd be happy to go ahead with her buying in her own name meaning owning one property each.

We are also based in Scotland.

Thanks in advance.

Which "experts" have you been consulting?

1) The higher rate of SDLT is for the purchase of Aditional Residential Properties it is not specifically for BTL properties.

2) As you are in Scotland SDLT will not apply instead you will pay LBTT.

3) If you are co-habitees* the Additinal Dwelling Supplement (an additional 3%) will apply because for the purpose of the Additional Dwelling Supplement, homes purchased by married couples, those in a civil partnership and cohabitants (those living as if a married couple) along with their dependent children will be treated as being owned by a single buyer.

Source: https://www.revenue.scot/land-buildings-transaction-tax/frequently-asked-questions/additional-dwelling-supplement

*You say you are living with "our parents" and I assume you each have your own set of parents otherwise the ADS is the least of your worries. Then again maybe your parents all live together in a hippy commune. Are you co-habitees?

AdrianC

Correct.


You own property A in your sole name.
Your unmarried partner buys property B in their sole name.
No +3%.

Married couples are viewed as one unit for SDLT purposes, unmarried are not.


But... Can your partner raise the finance to buy property B without you being a joint borrower?

Pixie5740

AdrianC wrote: »

Correct.


You own property A in your sole name.
Your unmarried partner buys property B in their sole name.
No +3%.

Married couples are viewed as one unit for SDLT purposes, unmarried are not.


But... Can your partner raise the finance to buy property B without you being a joint borrower?

I see the sassenachs are out in force again today

AdrianC

Pixie5740 wrote: »

I see the sassenachs are out in force again today

Ah, yes, I missed the "in Scotland" at the foot...

Rkd1989

Thanks for the replies. Just to clarify, I'm at my parents and back on the electoral register at the address here, my mrs is at her parents, also on the electoral register there. No hippyfoolery on the go here!

As for deposit for the next house, she's already been provisionally accepted for x amount which is more than enough to cover what we'd be after.

Should we go down the road of not putting me on the mortgage then, how easy would it be to be caught out if this was the case and what are likely penalties? It does seem slightly harsh that she can't buy her own house to avoid said 3%, and have someone else live there who also happens to own their own house.

FWIW, I'm obviously very sceptical about the whole thing but providing I don't change any official address details (work/bank/electoral roll etc) then I don't see how it can be enforced? Perhaps that's a very naive way of looking at it?

Cheers again.

Pixie5740

Rkd1989 wrote: »

Thanks for the replies. Just to clarify, I'm at my parents and back on the electoral register at the address here, my mrs is at her parents, also on the electoral register there. No hippyfoolery on the go here!

As for deposit for the next house, she's already been provisionally accepted for x amount which is more than enough to cover what we'd be after.

Should we go down the road of not putting me on the mortgage then, how easy would it be to be caught out if this was the case and what are likely penalties? It does seem slightly harsh that she can't buy her own house to avoid said 3%, and have someone else live there who also happens to own their own house.

FWIW, I'm obviously very sceptical about the whole thing but providing I don't change any official address details (work/bank/electoral roll etc) then I don't see how it can be enforced? Perhaps that's a very naive way of looking at it?

Cheers again.

You were until very recently a co-habiting couple and you will be a co-habiting couple again. I suspect the ADS will apply and the only legal way of avoiding it is to sell your BTL. The LBTT is done via self assessment so if your other half is willing to commit tax evasion then it should be quite straightforward but she needs to accept the risks of being caught.

https://www.revenue.scot/sites/default/files/Revenue%20Scotland%20-%20LBTT%20Penalties%20and%20Interest%20-%20%20Factsheet.pdf

AdrianC

Rkd1989 wrote: »

Thanks for the replies. Just to clarify, I'm at my parents and back on the electoral register at the address here, my mrs is at her parents, also on the electoral register there. No hippyfoolery on the go here!

As for deposit for the next house, she's already been provisionally accepted for x amount which is more than enough to cover what we'd be after.

Should we go down the road of not putting me on the mortgage then, how easy would it be to be caught out if this was the case and what are likely penalties? It does seem slightly harsh that she can't buy her own house to avoid said 3%, and have someone else live there who also happens to own their own house.

There's nothing to stop you living in the house she's buying - just as there's nothing to stop her living now in the house you own.


You just won't be a joint owner of the new one, same as she isn't a joint owner of the one you have now.