CAN A FIRST TIME BUYER AVOID STAMP DUTY AND BECOME A LANDLORD?

NOVAMET21

Hi,
I presume the answer is no but it seems like lots of people bend the rules and purchase their first property intending to live but then as soon as the completion date, they rent it out as they never intended to live in the property. This works when the first time buyer lives with their parents and buy an investment property.
Don't HMRC check this?

davidmcn

What makes you think there are "lots" of people doing this? Even if they get away with it, what do you think happens when they later want to buy their first owner-occupied property? 

AdrianC

It's nothing to do with HMRC. The +3% SDLT is for additional properties, not explicitly BtL.

It is, however, almost certainly a breach of their mortgage. And lenders don't like that if they find out. Not many BtL mortgages are available to FTBs, lenders prefer you to own your own home.

They probably aren't even making much money, if any.

davidmcn

AdrianC said:

It's nothing to do with HMRC.

The first time buyer concession is (as that only applies if you're buying your own residence). 

NOVAMET21

davidmcn said:

What makes you think there are "lots" of people doing this? Even if they get away with it, what do you think happens when they later want to buy their first owner-occupied property? 

Because I have heard of people doing it to avoid stamp duty, get cheaper interest rate for the first 2 years, no income tax to pay for the first 2 years and so on.

If they want to buy the property to live in then they would buy as an additional property.

The point I was making is that they have already got away with not paying a huge stamp duty when they were meant to in their first purchase.

davidmcn

ANMOLAG said:

davidmcn said:

What makes you think there are "lots" of people doing this? Even if they get away with it, what do you think happens when they later want to buy their first owner-occupied property? 

Because I have heard of people doing it to avoid stamp duty, get cheaper interest rate for the first 2 years, no income tax to pay for the first 2 years and so on.

If they want to buy the property to live in then they would buy as an additional property.

The point I was making is that they have already got away with not paying a huge stamp duty when they were meant to in their first purchase.

And have you reported this to HMRC? If not, you can't really complain about them not enforcing it.

The fraudulent mortgage application, and not paying income tax, are nothing to do with the SDLT. 

NOVAMET21

AdrianC said:

It's nothing to do with HMRC. The +3% SDLT is for additional properties, not explicitly BtL.

It is, however, almost certainly a breach of their mortgage. And lenders don't like that if they find out. Not many BtL mortgages are available to FTBs, lenders prefer you to own your own home.

They probably aren't even making much money, if any.

I thought Stamp Duty Tax was HMRC's responsibility as I thought the money goes to them.
Who is responsible then?
If HMRC or anyone is not checking then there lies the problem and hence people do it I suppose as no one finds out.
So, are you saying that the first time buyers can buy investment property and get first time buyer's relief on the stamp duty and the worst thing happens is that the mortgage lender will be cross but then the probability of the lender finding will be 0.01%. 

[Deleted User]

Why would they not have income tax to pay for first 2 years?  Even if it is a residential mortgage that is then let, tax should be paid on the income.  

Going through with what you describe will be tax fraud and mortgage fraud.  

There are plenty first time buyers who buy a buy to let to rent out.  Thats perfectly fine.   Thankfully brokers/lenders/solicitors do a good job in stopping most fraudulent cases when someone says they will live in the property but has no intention of doing so. 

The industry has a lot of ways of checking this but i wont name them here as I think you are looking for validation for something you already plan to do anyway

KatrinaWaves

Seeing as both your threads describe knowing ‘lots of people’ who can avoid all sorts of taxes, maybe ask those many people instead of us people...

NOVAMET21

davidmcn said:

ANMOLAG said:

davidmcn said:

What makes you think there are "lots" of people doing this? Even if they get away with it, what do you think happens when they later want to buy their first owner-occupied property? 

Because I have heard of people doing it to avoid stamp duty, get cheaper interest rate for the first 2 years, no income tax to pay for the first 2 years and so on.

If they want to buy the property to live in then they would buy as an additional property.

The point I was making is that they have already got away with not paying a huge stamp duty when they were meant to in their first purchase.

And have you reported this to HMRC? If not, you can't really complain about them not enforcing it.

The fraudulent mortgage application, and not paying income tax, are nothing to do with the SDLT. 

I'm just saying that there is a way you can bend the rule and people are doing it. That's all. It's not 1 or 2 doing it there are hundreds if not thousands doing it.
I understand your last point but I was just explaining the benefits (although illegal). Who deals with SDLT then? I understand it's the solicitor who deals with collecting the monies for the SDLT but if they don't know the purchasers plan then who will ever know. No one knows and that's the point I'm making and showing the flaw in the system.

[Deleted User]

How many people do you know that have definitely done this?  How many is 'lots'? Or is it stories from someone(s) who vaguely knows someone kind of thing - and how recently did they buy?  Data checking systems tend to be a lot better now.