Do we owe more stamp duty?

EmilyB23

Hi all,


I bought a house with my partner 6 months ago. He was a first time buyer (living with his Dad at the time) but I was already a homeowner and I sold my property to buy our current house together.


We thought we had done everything properly, until my partners elderly father mentioned a few days ago that the deeds of his house were transferred to my partner and his 2 brothers (probably 20+ years ago). My partner had no knowledge of this and as far as he was aware, he didn't own any other property.


Now I'm very concerned that we should have paid a higher rate of stamp duty as the house we bought together could now be classed as a second home? I have tried ringing the stamp duty advice line but I found them very vague and not very helpful. All they could tell me was that additional stamp duty 'might' be payable and they directed me to the Gov.uk website where I still couldn't find a definitive answer.


My partners dad's house is probably worth around £500,000 (Split equally between the 3 brothers). My partner has lived there all his life, there is no mortgage on the property and since my partner moved out, his Dad now lives there alone. The house we purchased together was for £400,000. Can anyone tell me if we should have paid a higher rate of stamp duty? And if so, what do we do now? I don't want to suffer any penalties in the future if it looks like we have tried to avoid paying the required tax?

sillyhilly

EmilyB23 wrote: »

We thought we had done everything properly, until my partners elderly father mentioned a few days ago that the deeds of his house were transferred to my partner and his 2 brothers (probably 20+ years ago). My partner had no knowledge of this and as far as he was aware, he didn't own any other property.

In that case, he had no knowledge of it so could not possibly be accused of tax evasion. Are you sure that the property isn't held in trust for your partner and his three brothers? It seems an odd thing to do to transfer all deeds of the property over to your three children for no real reason.

I would personally have a case of selective hearing in these circumstances. You may well have misheard your partner's father...

davidmcn

Has your partner actually checked whether he is registered as an owner, rather than relying on your elderly FIL's memory? But if he is then yes you should have paid the higher rate and should submit an amended return.

SDLT_Geek

Yes, if your partner has a share in the other property then the higher rates of SDLT were due on the recent joint purchase. I would expect HMRC to ask for interest on the late tax, but penalties would be unlikely.

As your partner was living in the other house, it would be possible to qualify for the refund of the extra £12,000 which should have been paid if, within three years of the joint purchase, he disposes of all of his interest in the other property. Does his father have the money to buy your partner out of his share? That could be a neat solution.

EmilyB23

Thank you for all of your replies. My FIL is in his late 80's but is still very mentally sound and does have a very good memory so if he says the deeds were transferred to his son's, I'm inclined to believe that that is the case. Unfortunately we haven't been able to check the paperwork yet so we will have to find this to double check exactly what the situation is.


My FIL has very little money and there would be no way he would be able to buy back my partner's share of the house. Also, if we are going to be faced with an additional bill of £12,000, we will really struggle to raise this extra cash, as all of our savings went towards the deposit and other associated costs of buying our current house. Could my partner give up his share in his dads property? Even if he did this, would we still have to pay the additional amount first and then apply for a refund?

Slithery

EmilyB23 wrote: »

Unfortunately we haven't been able to check the paperwork yet so we will have to find this to double check exactly what the situation is.

You can take a look for yourself without having to find any documents, go to the LR website and pay £3 to download the title.
https://www.gov.uk/search-property-information-land-registry

saajan_12

EmilyB23 wrote: »

Hi all,


I bought a house with my partner 6 months ago. He was a first time buyer (living with his Dad at the time) but I was already a homeowner and I sold my property to buy our current house together. - are you married? Then your property would be effectively treated as joint and your joint main residence, so the new purchase is a replacement of that at standard tax.


We thought we had done everything properly, until my partners elderly father mentioned a few days ago that the deeds of his house were transferred to my partner and his 2 brothers (probably 20+ years ago). My partner had no knowledge of this and as far as he was aware, he didn't own any other property. - Did partner not sign anything 20 years ago? Or was that when he was a minor and was the property put in a trust?


Now I'm very concerned that we should have paid a higher rate of stamp duty as the house we bought together could now be classed as a second home? I have tried ringing the stamp duty advice line but I found them very vague and not very helpful. All they could tell me was that additional stamp duty 'might' be payable and they directed me to the Gov.uk website where I still couldn't find a definitive answer.


My partners dad's house is probably worth around £500,000 (Split equally between the 3 brothers). My partner has lived there all his life, there is no mortgage on the property and since my partner moved out, his Dad now lives there alone. - can partner sell or gift the house back to his dad or to the brothers? If he didn't even know the house was in his name, then was he expecting any value from it or is he happy to gift it back? IF he wants to sell can he grant the buyer a 100% a private mortgage, with the price due whenevre the house is subsequently sold, or after x years or whatever.. The house we purchased together was for £400,000. Can anyone tell me if we should have paid a higher rate of stamp duty? And if so, what do we do now? I don't want to suffer any penalties in the future if it looks like we have tried to avoid paying the required tax?

I would transfer the house back to whoever put it in his name, as a gift.

00ec25

- partner appears to have been an owner of FIL's property for many years

- partner lived in said property before he married you

- at the point in time that you and he bought the property you both now live in he was (subject to confirmation) a property owner, not a FTB. You on the other hand sold your own property.

- you and he jointly purchased the new property. On that basis it is an additional property for him and the higher rate SDLT was due.

- if partner now tries to "lose" his ownership of his father's property then he will be hit for Capital Gains Tax on the increase in value (less his CGT allowance) between what it was worth when father gave it to him 20 years ago and what it is worth now on the open market. From that gain he can deduct the time he lived in it himself as his then only/main home . He may, or may not, be left with a net gain on which he has to pay tax

father in law may still have his marbles, but is guilty of the classic case of trying to tax plan on the cheap - he has got it wrong and it will bite both FIL and partner now and later in terms of SDLT, CGT and inheritance tax... gifting it back will not remove the CGT liability.

EmilyB23

My partner and I are not married. I have checked the documents available on the land registry for his dads house and the title register shows 4 owners - my partner, his dad and his 2 brothers. The document is dated April 2000 and my partner was in his teens then so probably signed any documents he was given without bothering to check the details or even knowing what he was agreeing to. The value stated on the title register is £100,000 and the property has increased substantially since then.


What should our next course of action be? Do we contact our solicitor and tell him we made a mistake? Or do we contact Land registry directly? Also, will they allow us some time to pay the rest of the balance? Or will we just be billed and asked to pay immediately?

davidmcn

EmilyB23 wrote: »

What should our next course of action be? Do we contact our solicitor and tell him we made a mistake? Or do we contact Land registry directly?

It's HMRC who administer SDLT, not the Land Registry. No need to involve your solicitor (assuming they've passed on to you the reference for the original SDLT return submission).

Also, will they allow us some time to pay the rest of the balance? Or will we just be billed and asked to pay immediately?

It's already overdue so I expect you'd be expected to pay it immediately, otherwise interest will continue to run on the outstanding balance.

00ec25

it does not matter that you are not married, you purchased as joint owners so the higher rate SDLT applies to both of you if one of you would fail the test when considered individually - he fails as he was already an owner who had not sold up so was liable, making you both liable

if you submitted the SDLT return less than 12 months ago you still have time to submit (in writing) an amendment - looks awfully like you will get an interest charge and possibly a penalty, see here:

https://www.gov.uk/guidance/stamp-duty-land-tax-online-and-paper-returns