Charge against a property as a percentage rather than absolute number

Rural_Puppy

getmore4less said:

If you use % it is a beneficial interest in the property which attracts both SDLT and CGT assessments. 

No. there would not be any beneficial ownership. The loan is given and a charge taken out over the property, same as a mortgage.
AIUI The bank loaning a mortgage over a property never becomes the beneficial owner unless they repossess?
It is the terms of the loan setting out when it has to be repaid and the amount, how could that confer ownership? (genuine question!)
Edited to add - sorry I just reread some other posts that ask the same thing. It seems that stamp duty would have to be paid if a percentage equity deal was made as then there would be BI.
But that is surely only if the person making the loan appears on the title deeds? 
How much stamp duty would it be? 25% of the current value? 100%?
Payable when? As far as I understand it, the trigger for stamp duty is a change in ownership, but that is not happening as the o/p won't appear on the title deeds.

getmore4less

Rural_Puppy said:

getmore4less said:

If you use % it is a beneficial interest in the property which attracts both SDLT and CGT assessments. 

No. there would not be any beneficial ownership. The loan is given and a charge taken out over the property, same as a mortgage.
AIUI The bank loaning a mortgage over a property never becomes the beneficial owner unless they repossess?
It is the terms of the loan setting out when it has to be repaid and the amount, how could that confer ownership? (genuine question!)
Edited to add - sorry I just reread some other posts that ask the same thing. It seems that stamp duty would have to be paid if a percentage equity deal was made as then there would be BI.
But that is surely only if the person making the loan appears on the title deeds? 
How much stamp duty would it be? 25% of the current value? 100%?
Payable when? As far as I understand it, the trigger for stamp duty is a change in ownership, but that is not happening as the o/p won't appear on the title deeds.

Mortgages don't take a beneficial interest in the property they are a simple debt, not based on %. Of the value. 

OP own solicitors have confirmed and there are links to HMRC interpretation of a beneficial interest in property.

Title deeds only record legal ownership. 

A lot of people don't understand the difference between legal and beneficial interest/ownership. 

Benefitial interest does not have to be just % of value. 

Interest in possession is an example where the beneficial interest is just the right to the use of the asset.

THat forms part of your estate for IHT even though you have no legal ownership and the asset is not part of your estate just the value of the asset. 

getmore4less

The SDLT is based on full consideration if any of the parties providing the consideration is getting a beneficial interest then if they own a second home additional rate applies.

Grumpy_chap

commonsensebrother said:

I was asked to give an update following chat with solicitor. 

They confirmed that a charge involving percentage equity is indeed considered a beneficial interest with respect to stamp duty. A charge involving the fixed cost of the loan is not. So the latter is clearly the way to go. Thanks for your input all.

Thank you for providing the update and feedback on the outcome - it makes everyone's efforts worthwhile and good forum etiquette.

Rural_Puppy said:

Thanks O/P.I have just seen this thread, and as I was reading through, 

Quite clearly, you did not actually read or take in the content of the thread.

getmore4less

Amazed people thought you could buy a house  put it someone else's name and avoid the tax implications.

Most of hese loopholes have been closed for the honest people. 

SDLT_Geek

The question about whether an equity based loan counts as a beneficial interest for stamp duty land tax purposes is considered further here: https://forums.moneysavingexpert.com/discussion/6243370/stamp-duty-on-equity-purchase/p1  There is a more detailed look at the statutory provisions and the comparison with the Help To Buy structure, which seems to be a close analogy to an intra family equity based loan.

stormCat99

Hi, when my parents couldn't afford to move near to us (they lived a few hours away) we wanted to help. Like yourself we didn't want to incur stamp duty, so our solicitor drew up a Declaration of Trust. This was written such that when the house is sold (many years off hopefully!) we would get back either the cash sum we provided originally, or 33% of the sale price, whichever is higher. This acts as a first charge on the property when sold (parents have no mortgage).

This arrangement is perfectly legal, doesn't attract stamp duty, and means we could help my parents to move nearby so we could look after them. Didn't cost that much to do in solicitor fees - think around £400.

HTH.

SDLT_Geek

I hope what the solicitor drew up was a loan agreement secured by a charge.  If there was any element of declaration of trust, it was hopefully to confirm your parents as sole beneficial owners with you only being a lender.

stormCat99

SDLT_Geek said:

I hope what the solicitor drew up was a loan agreement secured by a charge.  If there was any element of declaration of trust, it was hopefully to confirm your parents as sole beneficial owners with you only being a lender.

Yes that's right, parents sole beneficial owners and we are the only lender.

SDLT_Geek

boots_babe said:

SDLT_Geek said:

I hope what the solicitor drew up was a loan agreement secured by a charge.  If there was any element of declaration of trust, it was hopefully to confirm your parents as sole beneficial owners with you only being a lender.

Yes that's right, parents sole beneficial owners and we are the only lender.

Good news.  Anyone who is interested will see more detail on these issues about "equity loans" on the thread here: https://forums.moneysavingexpert.com/discussion/6243370/stamp-duty-on-equity-purchase/p1