Stamp Duty tax on second property

enzo88

Hi, I'd appreciate some advice around Stamp Duty.
My wife and I are considering purchasing a house. However, the house we currently reside in (along with my mother and brother) is solely in my name but ultimately will belong to my brother.
Using the Stamp Duty Tax calculator on the .Gov website, it has calculated on a property worth 180k, the stamp duty would be as follows:
2% Stamp duty on £55000 (180k - 125k) = £1100
Plus 3% additional property Stamp Duty = £6500

I noticed the .Gov website states that
'If you dispose of your previous main residence within 3 years you may be eligible for a refund of £5,400.'

Since this new property would be mine and the wife's main residence, if I transfer ownership of the current house to my brother, would I be eligible for a refund of the £5400?

SDLT_Geek

enzo88 said:

Hi, I'd appreciate some advice around Stamp Duty.
My wife and I are considering purchasing a house. However, the house we currently reside in (along with my mother and brother) is solely in my name but ultimately will belong to my brother.
Using the Stamp Duty Tax calculator on the .Gov website, it has calculated on a property worth 180k, the stamp duty would be as follows:
2% Stamp duty on £55000 (180k - 125k) = £1100
Plus 3% additional property Stamp Duty = £6500

I noticed the .Gov website states that
'If you dispose of your previous main residence within 3 years you may be eligible for a refund of £5,400.'

Since this new property would be mine and the wife's main residence, if I transfer ownership of the current house to my brother, would I be eligible for a refund of the £5400?

Yes, but only if you genuinely transfer the entire ownership, legal and beneficial, within three years of you buying your new home.  It would not work if there is an arrangement for your brother to transfer it back to you.

It would be worth checking what you mean by saying that the current house is "in your name".  Who does it really belong to?  If the underlying beneficial interest already belongs to someone else, perhaps your mother or your brother, then perhaps the extra 3% SDLT is not due in the first place.

The SDLT rules generally "look past" the issue of whose name a property is in.  Instead they operate on the basis of the true underlying beneficial ownership.

enzo88

So by 'in my name' I mean the mortgage is in my name. Once I've cleared the mortgage (hopefully in the next 3 years) I will be transferring the house/deed to my brother's name. My mother is elderly and brother unable to work hence the mortgage is in my name, but the house really belongs to them.
I suppose I can discuss this with the conveyancer dealing with the transaction and take their advice with regards to whether I should pay the 3% to begin with given it's not really my house.

SDLT_Geek

enzo88 said:

So by 'in my name' I mean the mortgage is in my name. Once I've cleared the mortgage (hopefully in the next 3 years) I will be transferring the house/deed to my brother's name. My mother is elderly and brother unable to work hence the mortgage is in my name, but the house really belongs to them.
I suppose I can discuss this with the conveyancer dealing with the transaction and take their advice with regards to whether I should pay the 3% to begin with given it's not really my house.

Yes, the key will be get to get to the bottom of who the house really belongs to.

enzo88

The house really belongs to them and myself/wife won't be living in it ourselves, but wasn't aware the taxman will look beyond the title or deed holder/name.
If they do then great. 

SDLT_Geek

enzo88 said:

The house really belongs to them and myself/wife won't be living in it ourselves, but wasn't aware the taxman will look beyond the title or deed holder/name.
If they do then great. 

It will be relevant what was said to the lender.  That might make it clear that legally it does belong to you, even though you have an intention to gift it in due course.  

It might be worth getting out the papers from the time of the purchase and the mortgage to see what was set up at the time.