Stamp duty to be paid on main residence still?

MOBurnski

So I coown a property with my former partner. A residential mortgage currently. This property is being transferred to me and to a buy to let interest only mortgage. The other co-owner is having the equity transferred to them. My equity is staying in the property, 25% making up the deposit with the aim of letting it ASAP. I have always been of the understanding I would be paying stamp duty on this property. Valued at 195000. 

In addition I am buying a property to live in with my partner. A residential mortgage. Property value 281000. As my main residence I had assumed this would be exempt from stamp duty, as per the government exemption that expires on the 31st March.
The solicitor is dealing with these simultaneously.

However. The paralegal told me today the stamp duty would be paid on the residential property not the buy to let.
This is contrary to the advice I have received and undermines the viability of bothering to do a buy to let (was supposed to be a solution to a sale falling through).

Which version of events is correct?

Many thanks
Mart

SDLT_Geek

Neither version is correct.  If both transactions go through simultaneously, then both will be liable to the 3% surcharge.  I assume the properties are in England, so it is the SDLT rules you need to consider.  I am assuming you are not saved by the "under £40,000 rules.
(a)  At the end of the day when you buy the share in the property from your ex-partner, you will have two properties.  So the 3% extra applies to the "chargeable consideration" given for the share.
(b)  At the end of the day when you buy your new home, you will have two properties.  So the 3% extra applies to the price for the new home.  This is assuming that the "replacement exception" does not save you.  The replacement exception does not seem to apply from what you say, unless there is another property you have not told us about, which you have sold and had lived in within the last three years as your only or main residence.

oldbikebloke

as geek says, additional rate on both
- currently you (co)own one property. It is not being sold
- you are buying an additional property, but the fact you will live in it as your (new) home is irrelevant, since you have not sold your old home ("replaced it")
- you are "purchasing" an additional share in a property that is not your home, whilst you will own another one making that additional share an increase in your personal property portfolio, ie, you have acquired an "additional" property 

MOBurnski

Thanks SDLT, is the 'simultaneous' in your opening line significant. It could be engineered not to be. 
Having to pay it on both properties is somewhat a financial tragedy. I find it hard to understand how this advice was not given to me by the advisors/brokers that have been paid to advise me!

MOBurnski

Are there any workarounds?

oldbikebloke

MOBurnski said:

Thanks SDLT, is the 'simultaneous' in your opening line significant. It could be engineered not to be. 
Having to pay it on both properties is somewhat a financial tragedy. I find it hard to understand how this advice was not given to me by the advisors/brokers that have been paid to advise me!

the issue is that the test is "at the end of the day" how many do you own
simultaneous means both count against you

1. buy the share in the (soon to be) buy to let property and standard rates would apply as you are owner of only one property (and are simply increasing your share of it)
then
2. at a later date, buy the "new home" and pay higher rate on the purchase price as you have not replaced your home (by selling it)

note that would NOT work in reverse as you are already an owner of the BTL and are not selling it, so buying the "new home" first would always be an additional rate purchase as that purchase increases the number of properties you own (subject to the £40,000 rule as already mentioned)

SDLT_Geek

oldbikebloke said:

the issue is that the test is "at the end of the day" how many do you own
simultaneous means both count against you

1. buy the share in the (soon to be) buy to let property and standard rates would apply as you are owner of only one property (and are simply increasing your share of it)
then
2. at a later date, buy the "new home" and pay higher rate on the purchase price as you have not replaced your home (by selling it)

note that would NOT work in reverse as you are already an owner of the BTL and are not selling it, so buying the "new home" first would always be an additional rate purchase as that purchase increases the number of properties you own (subject to the £40,000 rule as already mentioned)

I agree with @oldbikebloke

MOBurnski

Guys for clarification. I came into this conversation with no understanding of higher and standard rates. Just stamp duty. 3%.

I also came into it with the understanding that there is an exemption on stamp duty until 31st March.

My partner has sold her property. She is buying the residential with me at purchase 281000. She owns no property at the moment. I'm adding that in in case it leads to any work around.

My understanding right now is that my course is to ensure I complete ownership of the buy to let first. What would I pay (stamp duty) on this house valued at 195000. Does it make a difference if I go into this with my new partner or not?

Can you tie up these loose ends. Thanks much.

SDLT_Geek

If you acquire the share in the let property first, owning nothing else and in the holiday, then no SDLT would be due on that.
If your partner buys the let property with you, as she owns nothing else, there would still be no SDLT on the let property.
It would still leave you with higher rates on jointly buying the new home.  She would count as “replacing her main residence”, but you would not.

oldbikebloke

MOBurnski said:

My partner has sold her property. She is buying the residential with me at purchase 281000. She owns no property at the moment. I'm adding that in in case it leads to any work around.

My understanding right now is that my course is to ensure I complete ownership of the buy to let first. What would I pay (stamp duty) on this house valued at 195000. Does it make a difference if I go into this with my new partner or not?

Can you tie up these loose ends. Thanks much.

the status of each purchaser is examined independently
Obviously neither you nor she can claim first time buyer exemptions so her lack of property is not a "workaround" in the sense you think it is.

partner
no longer owns any property
if she purchased new home in her sole name, then (potentially subject to an "interest" in wherever she has been living since completing sale of the home she has already sold) she would be classed as replacing her main home, and so subject only to standard rate. 
Until 31 Mar 21, standard rate 0% on first 500k so 281 @ 0% = 0 
From 1 April 21 standard rate on 281k will be 0% on first 125k, 2% on next 125k and 3% on residual 31k = 3% so total £4,050

HOWEVER,
that does not seem to be the actual position since it appears you and her will be co-owners of new property

you
you currently own a property whose value appears to be 195k and on that basis it seems the share of it which you already own would be worth > £40k
so, as you and partner will be buying new home together, your status as ongoing property owner means the entire purchase is subject to higher rate (there is no split into his 'n hers). 
Until 31 Mar 21, higher rate on 281k will be 3% on first 500k so 3% on 281 = £8,430
From 1 April 21 higher rate on 281k will be 3% on first 125k, 5% on next 125k and 8% on remaining 31k so total £8,730

scenarios
a) you buy out your ex's share in the current property. You have not (yet) purchased the new property with new partner.
 you have not given values of o/s mortgage and any cash for her share of equity transferred to you but standard rate would apply to that total. Whether the mortgage was split 50/50 with ex may be relevant in terms of how much o/s mortgage applies

you subsequently purchase new house with new partner - higher rate applies as above 

b) you buy new house with new partner and then buy old old partner
higher rate applies to both transactions 

c) you buy out ex partner. New partner buys new property in her sole name
standard rate applies to both transactions 
you are NOT a co-owner of the new property 

d) you buy out ex partner. New partner buys new property in her sole name, and at a later date you buy a share of new property from new partner
standard rate applies to your purchase from ex and, for partner, to initial purchase of new by her
your later purchase from new partner is at higher rate applicable to cash paid + your share of o/s mortgage on new property 

e) both you and new partner buy out the ex. Subsequently you both buy new home  
standard rate on ex share purchase
higher rate on new purchase 

f) "you" buy new house and subsequently both you and new partner buy out ex's share of old property 
new house solo purchase - see opening point above 
new house joint - higher rate
ex share joint purchase - higher rate as at least one of you will always be an ongoing existing owner 

 

[Deleted User]

MOBurnski said:

I find it hard to understand how this advice was not given to me by the advisors/brokers that have been paid to advise me!

Brokers wont/shouldn't be providing tax advice. And i am pretty sure conveyancers will have a disclaimer saying they are not advising, just estimating.

If you want tax advice then you will have to get a tax advisor