Buying a second home - stamp duty

tsolrm

When buying a second home - I am aware that additional stamp duty is imposed (3% currently for properties under 500k). Which is annoying because I only own part of it. During the property purchase process at any point to I have to give details to HMRC or anyone else about the other property or its other owners?
Also what happens if I 'gift away' that property - do I need to declare that gift when I buy my new property?
Also my part of the property is worth waaaaaaaay less than 40k. I have read about some exceptions that in this case the 3% can be avoided. What proof would I need to provide in this case? How can I prove this if the property is abroad?

AdrianC

tsolrm said:

When buying a second home - I am aware that additional stamp duty is imposed (3% currently for properties under 500k).

The additional rate is 3% for any and every property. It just happens that it's 3% on top of currently 0% for <£500k as a covid market incentive.

Which is annoying because I only own part of it.

Only own part of the other property? So long as your ownership is £40k+, you're liable.
A joint owner of this one? So long as one joint owner is liable, +3% is charged on the entire purchase.

During the property purchase process at any point to I have to give details to HMRC or anyone else about the other property or its other owners?

Sorry, are you wondering aloud about lying to HMRC on a tax form so as to illegally evade paying the tax that's due...?
Not a good idea.

Also what happens if I 'gift away' that property - do I need to declare that gift when I buy my new property?

If you give your ownership away, you will no longer own that other property, so you will not be liable.

But giving a minimum of £40k-worth of asset away to avoid a maximum of £15k of tax seems a tad... drastic. If you're looking for a recipient, I'm happy to volunteer.

davidmcn

tsolrm said:

When buying a second home - I am aware that additional stamp duty is imposed (3% currently for properties under 500k). Which is annoying because I only own part of it. During the property purchase process at any point to I have to give details to HMRC or anyone else about the other property or its other owners?

No. But (assuming the other property is in the UK) won't they already know that information anyway?

Also what happens if I 'gift away' that property - do I need to declare that gift when I buy my new property?

Not specifically.

AnotherJoe

You write "I only own part of it" ????

Have you bought it already? Or do you mean " I would only own part of it after I've bought"

Also, when you say "gift away" in quotes, does that mean you would be intent on committing fraud by gifting it to someone legally but really, with their collusion,  intending to maintain control of it, or did you just for some reason put quotes around those words? And in any case why would you buy this secodn property if you then "gifted it away"?

tsolrm

AnotherJoe said:

You write "I only own part of it" ????

Have you bought it already? Or do you mean " I would only own part of it after I've bought"

Also, when you say "gift away" in quotes, does that mean you would be intent on committing fraud by gifting it to someone legally but really, with their collusion,  intending to maintain control of it, or did you just for some reason put quotes around those words? And in any case why would you buy this secodn property if you then "gifted it away"?

The asset is worth barely anything, the 3% on stamp duty would actually be more than it's worth

SDLT_Geek

tsolrm said:

Also my part of the property is worth waaaaaaaay less than 40k. I have read about some exceptions that in this case the 3% can be avoided.

If we are talking about the value of your share in the other property you already own (not the value of the share in the property you are buying) then there is an "under £40,000 rule" which can save you from the extra 3% SDLT.  So if your share in the property abroad is worth under £40,000 then it does not "count against you".  There is some guidance about it here: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09780.

tsolrm

SDLT_Geek said:

tsolrm said:

Also my part of the property is worth waaaaaaaay less than 40k. I have read about some exceptions that in this case the 3% can be avoided.

If we are talking about the value of your share in the other property you already own (not the value of the share in the property you are buying) then there is an "under £40,000 rule" which can save you from the extra 3% SDLT.  So if your share in the property abroad is worth under £40,000 then it does not "count against you".  There is some guidance about it here: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09780.

That's helpful - thanks. But how would I prove that? Would I need to get the other property valued? Pretty hard to do that if it's abroad

AnotherJoe

You dont need to prove it unless challenged. If its under £40k i just wouldnt  say anything and look at proving it later in the highly unlikely event anyone followed up.

Maybe at most get a valuation now and whatever documentation from (?family) as to the % owned now in case thats more difficult in say 5 years time to know what it was worth 5 years ago.

tsolrm

AnotherJoe said:

You dont need to prove it unless challenged. If its under £40k i just wouldnt  say anything and look at proving it later in the highly unlikely event anyone followed up.

Maybe at most get a valuation now and whatever documentation from (?family) as to the % owned now in case thats more difficult in say 5 years time to know what it was worth 5 years ago.

Yeah understood. I will get it valued of-course but the whole property is not worth 40k so my part is definitely not going to be worth more than 40 But when I pay stamp duty - is there like a box that I have to tick saying that I have an additional overseas property? Would this not interest the taxman? Also that original property was a gift - does that affect the situation at all?

AdrianC

tsolrm said:

AnotherJoe said:

You write "I only own part of it" ????

Have you bought it already? Or do you mean " I would only own part of it after I've bought"

Also, when you say "gift away" in quotes, does that mean you would be intent on committing fraud by gifting it to someone legally but really, with their collusion,  intending to maintain control of it, or did you just for some reason put quotes around those words? And in any case why would you buy this secodn property if you then "gifted it away"?

The asset is worth barely anything, the 3% on stamp duty would actually be more than it's worth

If it's <£40k-worth, then it doesn't count towards the additional property SDLT.

Note, that's the value of your asset - any borrowings against it aren't offset to mean the value of your equity... So if you have a 1/2 share of a £100k property with a £75k mortgage against it, that's a £50k asset, not a £12.5k one, so would not be disregarded. But a 1/2 share of a £75k property would be disregarded, as £37.5k is <£40k.

No, how you came to own it is irrelevant.