Will I have to pay the extra stamp duty?

misssounsure

OK so my partner (not married) owns a flat which he has rented out. He owns a second 2 bed house which he lives in but is selling. Once this second flat is sold he will live in the house I own. We are then thinking of buying together. However I cannot be on the mortgage or title deeds if I don't sell my home. My understanding is he will not pay additional stamp duty because he has replaced his main residence.

The plan is I will keep my home and rent it out but release 20k equity to put in the new home. Now if we move out of mine into rented for say 6 months does that mean I have replaced my main residence and I can then jointly own the new home? It's no different really to my partners original first flat which he rents out surely? 
'Replacing main residence' doesn't necessarily mean selling it does it? It just means not living there?
Any links to gov docs confirming would be so helpful! 

misssounsure

*to clarify that should read that my partner bought a flat years ago which hes rented out for years. He then bought a small house which he lives in. He is selling his house and moving into my house. 

[Deleted User]

misssounsure said:

OK so my partner (not married) owns a flat which he has rented out. He owns a second 2 bed house which he lives in but is selling. Once this second flat is sold he will live in the house I own. We are then thinking of buying together. However I cannot be on the mortgage or title deeds if I don't sell my home. My understanding is he will not pay additional stamp duty because he has replaced his main residence.

The plan is I will keep my home and rent it out but release 20k equity to put in the new home. Now if we move out of mine into rented for say 6 months does that mean I have replaced my main residence and I can then jointly own the new home? It's no different really to my partners original first flat which he rents out surely? 
'Replacing main residence' doesn't necessarily mean selling it does it? It just means not living there?
Any links to gov docs confirming would be so helpful! 

Replacing your main residence does mean selling your current main residence. Moving into rented accommodation won't make a blind bit of difference. 

Keeping your current home, releasing £20k of equity to put into the new home but not going on the deeds won't work either. 

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09730

davidmcn

misssounsure said:

'Replacing main residence' doesn't necessarily mean selling it does it? 

Yes, it does. Otherwise it would apply to anyone who was moving house. The whole point of the additional tax is that it applies to anyone increasing the number of properties they own.

misssounsure

Thanks that's helpful. Just two more questions! What about my partner? His original flat he's had for years but not lived in it for years and doesn't want to kick his tenants out. He wants to keep the original flat.. That won't incur the addituonal stamp duty will it?

Secondly, the new home if its in his sole name but I gift him 20k and I'm not on mortgage or title deeds etc (so I don't own it in any way) then that in itself won't incur addiontal stamp duty will it? As I will only own one property (my originall home which I rent out) and I then live in his new home. We aren't married

misssounsure

My understanding is my other half doesnt pay the additional stamp duty because he has replaced his main residence (he's sold( replaced) his main residence even tho he has a second property). Whereas I won't have sold my main residence. Is that correct? 

oldbikebloke

misssounsure said:

Thanks that's helpful. Just two more questions! What about my partner? His original flat he's had for years but not lived in it for years and doesn't want to kick his tenants out. He wants to keep the original flat.. That won't incur the additional stamp duty will it?

Secondly, the new home if its in his sole name but I gift him 20k and I'm not on mortgage or title deeds etc (so I don't own it in any way) then that in itself won't incur additional stamp duty will it? As I will only own one property (my original home which I rent out) and I then live in his new home. We aren't married

partner's position is clear. He is not increasing the number of properties he owns. He owns 2 now, he will own 2 after, so he, in his sole name, would not be liable to higher rate
it is the fact you intend to jointly purchase that causes higher rate because if one person is liable higher rate (as you are since you own 1 and will own 2) then the higher rate applies to both people 

as for giving him money, yes he could buy at standard rate in his sole name. However, you presumably expect to get your 20k back at a date in the future (or more if you think it represents a % share in the property and a share of any value increase) and therefore, legally speaking, you have a "beneficial interest" in the property, even if you are not listed as a legal owner.
Whether partner's conveyancer would go as far as finding that out when processing the sole name purchase is a moot point. Nonetheless, in tax law, the higher rate should apply because of your beneficial interest. You can take a gamble on that never been discovered if you want.
Similarly if you then buy into his property at a later date, you would still be liable for higher rate if your share is over the threshold given you are not married.
.

misssounsure

That's so helpful thank you! Final questions!.. If we get married in the future would we then have to pay the additional stamp duty?!!

Also you referred to equitable interest but if I'm essentially gifting 20k how's that different to say a young first time buyers parents giving them 20k to help get them on the property ladder. The parents wouldn't be expected to sell their home and surely no extra stamp duty would be due as that would be ridiculous. How's that situation different legally to me giving my other half 20k? 

[Deleted User]

misssounsure said:

That's so helpful thank you! Final questions!.. If we get married in the future would we then have to pay the additional stamp duty?!!

Also you referred to equitable interest but if I'm essentially gifting 20k how's that different to say a young first time buyers parents giving them 20k to help get them on the property ladder. The parents wouldn't be expected to sell their home and surely no extra stamp duty would be due as that would be ridiculous. How's that situation different legally to me giving my other half 20k? 

The parents wouldn't expect to live in the property, would they? I linked to the HMRC manual earlier and I suggest you read it because it answers all your questions. 

davidmcn

misssounsure said:

Also you referred to equitable interest but if I'm essentially gifting 20k how's that different to say a young first time buyers parents giving them 20k to help get them on the property ladder. The parents wouldn't be expected to sell their home and surely no extra stamp duty would be due as that would be ridiculous. How's that situation different legally to me giving my other half 20k? 

Because "gifts" in that situation have no strings attached, whereas here it's going to be assumed that you're "gifting" the £20k in the expectation that you'll be allowed to live in the property (and eventually will see the £20k again in some form).

oldbikebloke

misssounsure 

Also you referred to equitable interest but if I'm essentially gifting 20k how's that different to say a young first time buyers parents giving them 20k to help get them on the property ladder. The parents wouldn't be expected to sell their home and surely no extra stamp duty would be due as that would be ridiculous. How's that situation different legally to me giving my other half 20k? 

because parents are giving a genuine GIFT which they do not require to be given back to them and have no legal or beneficial  interest in the property their kid owns - whether the kid lives there, or lets it, is irrelevant. The parent's lack of any interest is what counts.

you on the other hand are INVESTING 20k in the property and have every expectation of:
a) living there (you benefit from your investment)
and/or
b) getting that money back when the property is sold (you benefit from your investment).

That monetary return could either be as a 20K lump sum without a "profit" or, if you and he have a documented declaration of trust, you will expect to get back 20K + £x, or x% of the sale value of the property, ie you stand to gain from any increase in value (of course the DoT may/should also address the situation where you and he has split up and the sale is for less than the original purchase price, so you take a "loss"). 

that is what is meant by "beneficial interest" and is what triggers the higher rate SDLT, even if you are not listed as a legal owner on the deeds (or party to the mortgage for that matter). 
"Giving" 20K to someone you share a bed with is always going to look contrived and presumably done only for tax evasion purposes, but of course is perfectly possible if you choose to lie to the solicitor filling out the SDLT return - just don't get caught.