Advice please: SDLT on a joint purchase

Saiph

Hi, new poster here, please forgive any errors.

So, I'm sorry if this has been answered elsewhere. I've searched through a lot of SDLT threads on the internet and what I've read didn't help me to understand.

Here's the background.

1. Buying jointly with a partner
2. The house value is 190k, an all-cash purchase
3. His first purchase, my second - I'm holding onto my flat
4. SDLT if we buy jointly is £7000

Here's the question:

If he were to buy it in his name only (resulting in a lesser stamp duty bill), and then transfer half of the ownership to me at a later point (namely equity to the value of £95k) - would that be a more tax efficient way to do things?

Or would we incur stamp duty once the transfer of ownership was made?

As you can see, I am not an expert and have been getting conflicting information on this for a few days now. Obviously, I'm trying not to run afoul of the rules here!

Any advice you could provide is very much appreciated, thank you.
S

SDLT_Geek

Does your partner have enough money to buy the property entirely alone? If you are putting in any of the money then (even if the property is in your partner’s name) you will have an underlying share in the property from the start. That means you would be treated as joint buyers for SDLT.

Saiph

Hi SDLT Geek

"Does your partner have enough money to buy the property entirely alone?" - No, not by a long shot!

"If you are putting in any of the money then (even if the property is in your partner’s name) you will have an underlying share in the property from the start. That means you would be treated as joint buyers for SDLT." - OK, fair enough - even if they money were to be given to him as a gift before the purchase?

allconnected

even if the money were to be given to him as a gift before purchase?

You have two problems with this - firstly, this will only be a genuine gift if you were to give up any claim against the gifted amount permanently. Ask yourself - if he decided to kick you out of the property a few months after purchase would you be saying “fair enough, it’s his house to do with as he wants?” If you have any expectation that your “gift” will be reciprocated with, say, a share in the house, it’s not a true gift. If you pay stamp duty on this basis while knowing this isn’t true, that’s tax evasion, not tax planning.

Secondly, even if this is a genuine gift, you’ll struggle to get both the mortgage company and the Revenue to accept that you gave your money away to buy a house to live in as excluded occupier when you could have used the cash to buy as part owner. The logic that you gave away a large sum of money to save a much smaller sum of money doesn’t make sense unless you haven’t really given it away at all.

Allconnected

SDLT_Geek

I agree with allconnected.

Slithery

Tom99 wrote: »

The mortgage co will want to know where your partners deposit has come from and also who is going to be living in the property.

allconnected wrote: »

...you’ll struggle to get both the mortgage company...

What mortgage company?

Saiph

Slithery's correct insofar as he/she points out that there is no mortgage company, so I don't think there's anything to worry about there - it's more what HMRC would say, I think?

Allconnected, you make a good point there.

"The logic that you gave away a large sum of money to save a much smaller sum of money doesn’t make sense unless you haven’t really given it away at all." - seems to suggest that this would be seen as tax evasion? As I stated in my first message, I'm not interested in getting on the wrong side of the taxman at all.

Again - thanks to all for your help so far.

00ec25

Saiph wrote: »

As I stated in my first message, I'm not interested in getting on the wrong side of the taxman at all..

An excellent stance to take

the SDLT rules are explicit.
If "you" have a "beneficial interest" in the property then you are liable to pay SDLT on its purchase

beneficial interest is a clear cut concept: will you, or will not, get 1 penny or more of the sales proceeds were the property to be sold?

answer yes = "you" have a beneficial interest, and so must pay SDLT on its purchase

rules here:
https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09764

Saiph

00ec25
Great, thank you very much. May I ask where you found that?

I've spent ages trawling through HMRC's guide on gov.uk (MSE won't let me post the exact link) and nowhere is it stated quite so explicitly!

00ec25

Saiph wrote: »

00ec25
Great, thank you very much. May I ask where you found that?

HMRC manuals are available on line. Use of google soon finds them...
https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual

it does however help to have picked up that the .Gov website is aimed at the terminally dense, and is pitched at the level of the barely literate, and therefore is best avoided in preference to something a little more informed such as the guidance for staff, not "the taxpayer".

Saiph

"it does however help to have picked up that the .Gov website is aimed at the terminally dense, and is pitched at the level of the barely literate, and therefore is best avoided in preference to something a little more informed such as the guidance for staff, not "the taxpayer""

Ah, thanks for that. This did not come up in my googling, though I probably should have spent more time looking.

To your point - I can be pretty dense, especially in matters of tax like this. Though I'd like to think of myself as (mostly) literate

Thanks again and very best.