Land and Buildings Transaction Tax - additional rates?

dctrgre

My partner and I are considering a move to Scotland in a couple of years’ time but are thinking ahead regarding the possibility of paying additional Land and Buildings Transaction Tax and would be grateful for some advice.

 The situation is;

- We are currently engaged and plan to get married at some point.

- I own a flat in England which I have lived in since 2014, my partner moved in here in 2015.

- My partner owns a flat in Scotland which she lived in from 2008–2013 and which has been let out since then. (From 2013-2015 she lived in rented accommodation)

- Both of the existing flats are in sole names.

We intend to buy a property in Scotland together. I will sell the England flat in order to pay for the deposit, but we haven’t decided whether to keep or sell the existing Scotland flat.

Our questions are;

1)    Will we be required to pay the additional rate of LBTT on the new property if my partner keeps the Scottish flat?

2)    Does the answer to 1) change if we get married first?

DoctorStrange

1) Yes
2) No

You could perhaps put the new house in your sole name to avoid the tax and add your partner's name if/when the flat is sold?

Alternatively, you could sell the flat, buy the main home,  then repurchase a flat and pay the ADS on presumably a lower amount (obviously costly but perhaps cheaper than the full ADS on the main home?)

dctrgre

Thanks very much - disappointing but useful to know!

Re your first suggestion - we will have a mortgage on the new property. My understanding is that in England transferring the property to partner/spouse would result in an SDLT charge on the amount transferred, is that the same in Scotland? (I assume buying in sole name would also affect affordability when taking out the mortgage, so likely a no-go anyway)

DoctorStrange

Sorry, but I've just checked and you'd both be treated as the same "economic entity"* in the first scenario so a no-go even without the transfer issue.

Again this might be costly (but perhaps less costly) but you could maybe start a BTL LtdCo and sell the flat to that company? That way, the LtdCo pays LBTT and ADS but you would avoid the ADS on the main home. You'd also be able to offset some expenses, and taking the profits as dividends/building up a reserve might have other tax benefits (albeit with some increased running costs). It's difficult to say without knowing all the numbers and your short/med/long term plans but might be something to consider?


* Frustrating that unmarried couples cannot choose to remain "financially independent" if they decide to live together!

dctrgre

Again that’s really helpful, thanks very much. The company could be a good idea as I think the value of the existing flat is below the regular LBTT threshold (although the extra amount would be payable) and I’d be confident about the ongoing admin/accounts etc once the initial setup/transfer has been done.

We’ll have to consider the best course of action & crunch the numbers when we do come to move, but the key points for the short term are that there’s no easy answer to the LBTT question, but that we don’t need to worry about the date of the wedding!