Bank of Mum & Dad and FTB Stamp Duty Relief

Thrugelmir

SDLT_Geek wrote: »

Whilst this is true I do not see that it affects the SDLT treatment if it is clear that the parents will have no beneficial interest, equitable interest, rights to proceeds of sale or another interest in the property, but merely the benefit of a loan (with or without security for the loan).

I merely made an observation in light of the solicitor's view. Perhaps there's more to the tale than we know.

chunkytfg

davidmcn wrote: »

Have they explained their rationale?

Perhaps they think the parents are to be named on the title of the property and thus making it a joint purchase? Plus this would make it eligible for the additional 3%

relaxtwotribes

Thrugelmir wrote: »

I merely made an observation in light of the solicitor's view. Perhaps there's more to the tale than we know.

No there isn't.

relaxtwotribes

davidmcn wrote: »

Have they explained their rationale?

Not yet, but with completion scheduled for 31 May, they need to decide. I will post the result later.

relaxtwotribes

The solicitors have come back after contacting HMRC to say that the purchasers will qualify for FTB relief provided that a legal charge is not registered. Which differs from my correspondence from HMRC which indicated that a legal charge did not cause a problem.
Anyway, completion is all set now with FTB relief available.

I have no idea what the effect would be of registering a legal charge post completion (say, in 3 months) without solicitors being involved. Hey ho.

kingstreet

Using that logic a residential mortgage which would always require a first charge over the property would trigger SDLT.

This is patently nonsense.

relaxtwotribes

I think that the difference is that The Bank of Mum and Dad are connected persons and might be using their son/daughter as a front for their own (second?) property. Thereby avoiding the extra 3% stamp duty AND gaining the FTB relief. So, I can kinda see where HMRC is coming from.

jennifernil

I don't see how that could be inferred if the property is solely in the name of the child.

If you are not putting a charge on the property then at least make sure the money is recorded as a loan, if that is what it is to be, that the interest rate (if any) is agreed, and the repayment terms, with all parties signing in front of a witness.

relaxtwotribes

jennifernil wrote: »

If you are not putting a charge on the property then at least make sure the money is recorded as a loan, if that is what it is to be, that the interest rate (if any) is agreed, and the repayment terms, with all parties signing in front of a witness.

Also Events of Default, Covenants, Negative Covenants etc. All good advice.

In our case the FTB has 90% to put down and the loan is only 10%, so in this case the FTB stamp duty relief is a larger proportion of the loan. In the end the issue could have been alternatively resolved by simply gifting the money instead of lending it. But that wasn't necessary.

Paulmridley

Hi I would like to help my son & his wife purchase a house, they do currently live in a mortgaged flat but would like a house to start a family The flat has  very little equity. They are both on low income (36K combined) I have been advised that the only way is for me to purchase one on a buy to let mortgage then rent it to them at cost to cover the mortgage repayments. I can see this been fraught with problems further down the line with inheritance tax ect. Any recommendations would be must grateful.