Stamp Duty calculation after inheriting property abroad

stevat

Hi all,

apologies if this has been previously discussed elsewhere, maybe I missed something but I did a search and wasn't able to find something that answers my exact question.

Wife and I are looking to buy our first house, so far we'd be considered FTB as we haven't ever owned property anywhere.
However, it now looks like my wife will inherit a share of a residential property abroad, as well as a share of a commercial property.

We understand that this means we're not going to be considered FTB anymore and will have to pay more stamp duty when we eventually find a house to buy. However, we are not sure how stamp duty will be calculated in our case? 

Will we pay the same as we'd pay if we already owned a house in the UK and then selling it, buying another and moving to that? Or will we pay the higher rate that someone who buys a 2nd home has to pay? We did a bit of research and it looks that the answer to this might depend on the value of the (residential) property my wife will inherit? i.e. whether the (market?) value of it is more or less than £40k? 

Not sure if that matters, but we have no plans of using the inherited property in any way (e.g. using it as a 2nd home). My wife's dad is owns a part of it and will continue to live there. 
We also tried to get a quote from a solicitor to have this question answered, but their quote came to almost £1000!

Thanks in advance for your time  

canaldumidi

You will own 1 property.

You will be buying a 2nd property.

You will pay the additional 3% SDLT.

If you sell the 1st property first, you will avoid the 2nd property SDLT.

SDLT_Geek

stevat said:

Hi all,

apologies if this has been previously discussed elsewhere, maybe I missed something but I did a search and wasn't able to find something that answers my exact question.

Wife and I are looking to buy our first house, so far we'd be considered FTB as we haven't ever owned property anywhere.
However, it now looks like my wife will inherit a share of a residential property abroad, as well as a share of a commercial property.

We understand that this means we're not going to be considered FTB anymore and will have to pay more stamp duty when we eventually find a house to buy. However, we are not sure how stamp duty will be calculated in our case? 

Will we pay the same as we'd pay if we already owned a house in the UK and then selling it, buying another and moving to that? Or will we pay the higher rate that someone who buys a 2nd home has to pay? We did a bit of research and it looks that the answer to this might depend on the value of the (residential) property my wife will inherit? i.e. whether the (market?) value of it is more or less than £40k? 

Not sure if that matters, but we have no plans of using the inherited property in any way (e.g. using it as a 2nd home). My wife's dad is owns a part of it and will continue to live there. 
We also tried to get a quote from a solicitor to have this question answered, but their quote came to almost £1000!

Thanks in advance for your time  

It would be useful to know what percentage share your wife is to inherit and from whom.  Also what share her father has.  He does not have a different kind of right, like a usufruct / right to live there?

jonnydeppiwish!

I think the additional question here is to ask whether she’d actually inherit these properties, or whether the executors will sell the assets first and realise the cash and pass this on.

stevat

SDLT_Geek said:

It would be useful to know what percentage share your wife is to inherit and from whom.  Also what share her father has.  He does not have a different kind of right, like a usufruct / right to live there?

Well, her dad and mum each owned 50% of the property. Now my wife will inherit her mum's share, as per her mum's will instructions, but her dad retains his 50% share and will continue to live in the property.

Not sure what the equivalence with the "Joint Tenants/Tenants in Common" notions is, but both her mum and dad each had "full ownership" of the property (not sure this makes sense the way I'm describing it).

According to the default inheritance rules, one's share of a property goes 50% to the surviving spouse and the other 50% is equally split between the children, unless of course a will exists and specifies otherwise (as in this case, will specifies that her mum's whole  share of the property goes to my wife).

jonnydeppiwish! said:

I think the additional question here is to ask whether she’d actually inherit these properties, or whether the executors will sell the assets first and realise the cash and pass this on.

She will inherit the properties, unless she decides to decline the inheritance (in case that make financial sense, in relation to higher stamp duty cost etc.)

SDLT_Geek

stevat said:

SDLT_Geek said:

It would be useful to know what percentage share your wife is to inherit and from whom.  Also what share her father has.  He does not have a different kind of right, like a usufruct / right to live there?

Well, her dad and mum each owned 50% of the property. Now my wife will inherit her mum's share, as per her mum's will instructions, but her dad retains his 50% share and will continue to live in the property.

Not sure what the equivalence with the "Joint Tenants/Tenants in Common" notions is, but both her mum and dad each had "full ownership" of the property (not sure this makes sense the way I'm describing it).

According to the default inheritance rules, one's share of a property goes 50% to the surviving spouse and the other 50% is equally split between the children, unless of course a will exists and specifies otherwise (as in this case, will specifies that her mum's whole  share of the property goes to my wife).

jonnydeppiwish! said:

I think the additional question here is to ask whether she’d actually inherit these properties, or whether the executors will sell the assets first and realise the cash and pass this on.

She will inherit the properties, unless she decides to decline the inheritance (in case that make financial sense, in relation to higher stamp duty cost etc.)

I will assume you are buying in England so that the relevant rules are for stamp duty land tax.  

It seems unlikely to me that the 3% extra SDLT will apply.  That is because there is a 3 year grace period for someone who inherits a share not exceeding 50% in another property.

The issues for first time buyers’ relief are different.  That could be relevant if you are buying a house to live in for not more than £500,000.

Whether the relief is available will depend on local law and whether an interest in the property overseas has vested in your partner.  In English law that could happen by an assent, an appropriation or the administration of the estate being complete.

stevat

Hi @SDLT_Geek, thanks for taking the time to write the above.

Hopefully that's indeed the case and we will not have to pay the additional 3% SDLT, presuming it takes us less than 3 years to find a property (yes, in England) that we like

Do you have a reference where we can read more about these intricacies of how SDLT works? Is this a good place to start?

We've also seen this and this that seem to basically say the same, about possibly not having to pay the extra 3%.

As for the FTB relief, we're probably going to lose it, as the administration of the estate should be complete within the next few months.

Slithery

stevat said:

Do you have a reference where we can read more about these intricacies of how SDLT works? Is this a good place to start?

That's just part of the manual. You can see the full contents here...

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual

SDLT_Geek

This is the page about the 3% surcharge and the 3 year grace period where the share inherited is not more than 50%: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09795

stevat

Thanks both, have a bit of reading to do

stevat

@SDLT_Geek, if I may ask one more thing, do you know what happens if the inheritance comprises of multiple properties?

e.g. if there are 3 residential properties and my wife inherits 50% (or 25%, in another scenario) of each one, does this mean that we still won't have to pay the 3% surcharge as her share still is 50% (or less) of the total estate? 

Or does the fact we're now talking about share in multiple properties changes things and means we're liable to the extra 3%?

I did read the SDLT manual and I think that if she is at 50% of the "whole/major interest" then the extra 3% is not payable, but I'm not sure I'm interpreting the manual (and the relevant terminology) correctly.

PS1 we're not forgetting the 3-year limit
PS2 the whole thing is quite complicated inheritance-wise, hence these extra scenarios
PS2 I'm assuming that a non-residential property is irrelevant to this discussion?


Thank you for your time, and to anyone else who may happen to have a read at this