Stamp Duty Question

etnoc

Wonder if anyone can help with this. 

My partner and I are considering buying two flats that have been created from a townhouse.  We intend to "de-convert" back into a single dwelling.  We'd need PP to do that properly, though likely we will get that, so put that to one side. 

My issue concerns Stamp Duty.   There is an option for the vendor to sell it to us as two dwellings or as one dwelling.   SD would be much higher as one dwelling (this is London). 

Now, can anyone set out what they believe to be the most efficient route, from a stamp duty perspective to acquire the properties.  Is it to buy each as a PPR and then combine them?   

TheJP

Do you own a property already? If so you will pay 3% on top of any SDLT (assuming you are in England). It all depends on the value but i would guess if its one dwelling then its one SDLT and one 3% increase. 

user1977

How is the vendor going to sell it to you as one dwelling? Do you mean they will do the conversion work first?

etnoc

Hi there

At the point of acquiring, neither my partner or I will own a property.  We are paying in cash (i.e. no bank issues). 

The vendor can either sell as two dwellings or as one. 

etnoc

If we buy as two properties, we each have a PPR, which we would then combine into one property.  Would that second stage trigger a stamp duty charge? 

jonnydeppiwish!

etnoc said:

If we buy as two properties, we each have a PPR, which we would then combine into one property.  Would that second stage trigger a stamp duty charge? 

Are you married or in a civil partnership? If not then you could buy one each. @SDLT_Geek can confirm

etnoc

We aren't married/ CP ... that's exactly what I'm getting at.  We can buy a property each as PPR and then combine ... so the key question is whether that act of combining would trigger a further stamp charge?  I think not.  CGT in theory yes, but a non-issue given there will be no change in value. 

Am I right? 

SDLT_Geek

It would be helpful to know if the townhouse has been converted to two flats (so you would buy it all) or into more than two flats.

It would be very odd to buy one flat each and then combine them physically!  You would each have a lease of part of a large flat / house.  That would not be mortgageable and could cause issues on a separation.  So the SDLT benefit of having two unlinked transactions might not be achievable practically.

For practical reasons you might need to buy jointly.  If buying jointly then you would be better for SDLT buying after the flats are combined as one (you could then take a single lease or, perhaps the freehold if you are to have the whole building).  The SDLT position is better is because you will be buying "one dwelling" and so pay standard rated SDLT.  If you buy two dwellings and then convert them to one afterwards:

• you will suffer the 3% surcharge on the purchase because you will own two dwellings at the point of completion
• multiple dwellings relief would not help very much because you are combining the flats into one (though there are some nuances here).

etnoc

Hi, SDLT_Geek, thank you for your response, but please can you stay focussed on these specific questions: 

- the property is currently two flats, the whole comprising a townhouse.  the SD payable if we buy separately (as a PPR each) is much less than buying as a single PPR property

- we would then, at some point in the future, aim to combine the flats, from a planning and title perspective. 

The very specific question is whether the above is legal and whether it would trigger any further SD on combination. 

Please ignore mortgages etc - we are not borrowing any money for this. 

etnoc

I should add for clarity, the townhouse is currently split into two flats, with the titles reflecting this  We are intending to buy both.