Concessionary Purchase Stamp Duty

Kev1986

Morning all,

We’re currently mid point of sorting our offer and buying a property from our parents... little back round.

We sold our last property 4 years ago but never had the money for the next step so my parents brought it for us and we have rented it from them since while we saved and improved salary’s to get the mortgage. We are now in a position to but it but are getting mixed views on stamp duty due on completion.

Market value £430k
Purchase price £350k
Mortgage £344,250.00

Our savings will pay for stamp duty smal deposit and fees

Mortgage is with Halifax and is classed as a concessionary purchase,

Big question is... will we pay stamp duty on the purchase value £350k (£7.5k) or the market value (£11.5k) ?..

Different people and different things I read are contradicting even down to offers from conveying companies

SDLT_Geek

For a "concessionary purchase" (also sometimes called a purchase at undervalue or gifted equity) I would expect the lender to recognize that the purchase price is the lower figure (£350,000) and that this should go on the contract and the transfer. SDLT should then be calculated on that figure.

There is an article about it here: https://www.blakemorgan.co.uk/news-events/blog/bank-mum-and-dad-concessionary-purchases/

Kev1986

This was my understanding but conveyancing companies are saying that the purchase price must be detailed as the market value with the diffrence to the paid price detailed as a gift with the stamp duty being paid on the higher value.

SDLT_Geek

Kev1986 wrote: »

This was my understanding but conveyancing companies are saying that the purchase price must be detailed as the market value with the diffrence to the paid price detailed as a gift with the stamp duty being paid on the higher value.

The conveyancers must be used to the "gifted deposit" type structure where your parents are seen as gifting you the money so that you can then pay a higher price (to reflect the market value). Some lenders insist on this way of doing it. Hopefully your lenders do not and will be happy for you to structure it as a concessionary purchase / sale at undervalue / family discount and so have the lower figure as the purchase price.

Kev1986

So we have an update on the offer and the house has been valued at £450k that’s great for the LTV but means another £1k stamp duty as they have said that the value has to be what they have valued it at,
If the stamp duty has to go through at the market rate rather than the purchase value it is going to cost us another £5k to what we had planned ��

kingstreet

Did you pick the right lender and solicitor for this at the outset?

As SDLT Geek has stated, SDLT is based on the consideration, the actual amount changing hands, not the notional value. Many lenders and conveyancers have a problem with how this works on a concessionary purchase.

Kev1986

Lender is halifax whom do the Concessionary Mortgage, it is them and there solicitor that is stating it is on the market value
My solicitor also thinks this as the difference is a “gift”

SDLT_Geek

What matters is the figure for the price that the lender requires to be put on the contract and transfer. If they require the full value to be put there then it is not really a concessionary purchase at all. It is better described as a "gifted deposit": with your parents gifting you money which you pay back to the your parents as part of the price (if only on paper).

One consequence might be that the lender feels protected against the implications of a transfer at undervalue. Another consequence is higher SDLT for you.

Kev1986

That’s how my solicitor described it, he said depending on the wording of the offer will depend how he can do it and what the resulting Stamp duty will be. Fingers crossed for £5k I guess

kingstreet

Halifax doesn't have a mechanism in its system for these cases. When the application is submitted, the broker has to call the service centre which will manually set the concessionary purchase element up.

Did your broker do this?

Kev1986

I don’t recall a call but know she had a print sheet where she had to go back and forth a few times changing values once offer was in place, going to catch up with halifax again tomorrow,
So frustrating when the professionals are messing about the whole point in going to the halifax and first of all talking to their lender is as we thought they would be well versed with this