Will we need to pay stamp duty?

Owleyes00

Hi,
My partner owns 12.5% of a property. His brother owns another 12.5% and his mum owns 75%, some of which is mortgaged. The fixed mortgage runs out in December this year at which point my Partner and I are considering buying his mum and brother out of their shares. It will be a first time buy for me and, technically speaking, also for my partner as he inherited his 12.5% (not sure if this is relevant). The house is worth about £240,000 so my partner’s share is worth about £30,000. We will be putting a £35,000 - £40,000 deposit down for the purchase of the remaining £210,000. Will we need to pay any stamp duty?  I have read up on some examples such as when you are buying out an ex partner etc. but I haven’t been able to work out how it applies to our situation. Grateful of any advice or pointers of where to go for it.

Thanks

[Deleted User]

Owleyes00 said:

Hi,
My partner owns 12.5% of a property. His brother owns another 12.5% and his mum owns 75%, some of which is mortgaged. The fixed mortgage runs out in December this year at which point my Partner and I are considering buying his mum and brother out of their shares. It will be a first time buy for me and, technically speaking, also for my partner as he inherited his 12.5% (not sure if this is relevant). The house is worth about £240,000 so my partner’s share is worth about £30,000. We will be putting a £35,000 - £40,000 deposit down for the purchase of the remaining £210,000. Will we need to pay any stamp duty?  I have read up on some examples such as when you are buying out an ex partner etc. but I haven’t been able to work out how it applies to our situation. Grateful of any advice or pointers of where to go for it.

Thanks

The definition of a FTB to qualify for the SDLT relief is as follows....

In order to count as a first time buyer, a purchaser must not, either alone or with others, have previously acquired a major interest in a dwelling or an equivalent interest in land situated anywhere in the world.

This includes previous acquisitions by inheritance or gift, or by a financial institution on behalf of a person under an alternative finance scheme.

Relief is not denied by virtue of a previous acquisition as a trustee unless the purchaser was also a beneficiary of the trust.

Relief is also not denied if the purchaser owns or has previously owned non-residential or mixed-use property, as long as that property did not include a dwelling.

This restriction does not apply where the interest acquired was the grant or assignment of a lease with less than 21 years to run.

If the property is purchased jointly, all the purchasers must meet these conditions.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/759714/Stamp_Duty_Land_Tax_relief_for_first_time_buyers_-_guidance_note.pdf

SDLT_Geek

I expect the "chargeable consideration" for buying an 87.5% share in a £240,000 property will be £210,000.  As @Lover_of_Lycra says, there is no first time buyers' relief.  On the standard rates, as we expect them to be at December 2021, SDLT on £210,000 would be £1,700.  The rules might change by then!

greatcrested

Out of interest, what constitutes

"not, either alone or with others, have previously acquired a major interest in a dwelling"

12.5%?

[Deleted User]

greatcrested said:

Out of interest, what constitutes

"not, either alone or with others, have previously acquired a major interest in a dwelling"

12.5%?

@greatcrested
9 HMRC took the view that the definition of "major interest" included any share in a freehold or leasehold property, however small the share was. That has been confirmed by legislation with effect for transactions completing on and after 29 October 2018.

from: https://www.blakemorgan.co.uk/wp-content/uploads/Downloads/Stamp-Duty-Land-Tax-Higher-rates-for-additional-properties.pdf

Apparently a 'minor interest' is something like a Right of Way or Right of Light (according to that document linked anyway

Owleyes00

Thank you for responses. @Deleted_User I appreciate the link but looks like that is for additional properties? I read something somewhere about not paying if the value of the share is less than £40,000? Happy to be told I am just wishful thinking though!

wilfred30

Isn't the value of the share you and your partner are buying £210k?

Owleyes00

wilfred30 said:

Isn't the value of the share you and your partner are buying £210k?

Yes. Perhaps I read it wrong. I interpreted it as the share you already own being worth less than £40,000 but your way sounds more likely 

SDLT_Geek

Owleyes00 said:

wilfred30 said:

Isn't the value of the share you and your partner are buying £210k?

Yes. Perhaps I read it wrong. I interpreted it as the share you already own being worth less than £40,000 but your way sounds more likely 

You may have been reading about Condition C in the rules for the 3% surcharge.  There is a rule that if your share in a different property is worth less than £40,000 then that does not "count against you" in working out whether the 3% extra SDLT applies to a purchase.  Here neither OP nor partner have interests in other properties, so the 3% surcharge is not the issue.  It is quantifying the "chargeable consideration" where part of it concerns debt.

Owleyes00

Hi thanks so much for the advice I had on this thread before.

We have since been looking into our situation more and getting our ducks in a row with regards to the purchase. We have discovered (I don’t know how he didn’t know) that my partner’s 12.5% of the property is in trust i.e. he would be owed this value if the house was sold. He is not and never has been a tenant in common on the property. Does this make a difference or am I just being hopeful?

SDLT_Geek

Having a 12.5% share is usually the same as being a "tenant in common".  So if the other interests are being bought out for £210,000, with completion in about December 2021, we would expect the SDLT to be £1,700.