SDLT - avoid 3% surcharge?

EssexHebridean

This reads like an HMRC Guidance note "example case"! 

KiwiCoop

A friend of mine bought a house with his new wife and just didn't bother mentioning to the solicitor that he already owned one.  If you're surprised to learn that, 7-8 years later, HMRC haven't been in touch you're giving them too much credit.

user1977

KiwiCoop said:

A friend of mine bought a house with his new wife and just didn't bother mentioning to the solicitor that he already owned one.  If you're surprised to learn that, 7-8 years later, HMRC haven't been in touch you're giving them too much credit.

"People often get away with tax evasion" isn't the sort of "money-saving" advice encouraged around these parts...

steven239

Some advice please on my particular scenario would be much appreciated.

My partner (no legal connection) has sourced a good property flip (ie. buy, refurb, sell).
I own a property, she doesn't.
If we bought together we would obviously be paying the higher SDLT rate.
I'm willing to give her the money to buy it outright.
Cash buy, no lending required.
I have a Deed of Trust saying that I have lent £x and she owes me £x back.
Her deal, I'm the funder.

I'm hopefully assuming (maybe incorrectly) that this would be a very different scenario to the original poster's situation and wouldn't be breaking any HMRC rules?

SDLT_Geek

steven239 said:

Some advice please on my particular scenario would be much appreciated.

My partner (no legal connection) has sourced a good property flip (ie. buy, refurb, sell).
I own a property, she doesn't.
If we bought together we would obviously be paying the higher SDLT rate.
I'm willing to give her the money to buy it outright.
Cash buy, no lending required.
I have a Deed of Trust saying that I have lent £x and she owes me £x back.
Her deal, I'm the funder.

I'm hopefully assuming (maybe incorrectly) that this would be a very different scenario to the original poster's situation and wouldn't be breaking any HMRC rules?

It is indeed a different scenario from OP's if you are simply lending the buyer some money and will have no share in the property yourself.

Your partner would lose her status as a first time buyer for SDLT (if she has not owned a property before).  She would not be entitled to claim first time buyers' relief on this property as the intention is to sell it, not for her to live in it as her only or main residence.

The loan document should not be called a "deed of trust".  That terminology suggests you have a share in the property rather than a loan.  You might want a legal charge back.  There being no legal connection you would need to check if there are consumer credit / money lending formalities to deal with.

steven239

Thank you SDLT Geek. Is a legal chargeback the same as taking a Charge like a traditional lender would have a First or Second Charge on a property, or is this different?

Also now taking the same example but instead of just lending the money and receiving the money back (with or without interest), instead I receive the money back with a share of the profits, would this then trigger an 'interest' and higher SDLT?

SDLT_Geek

steven239 said:

Thank you SDLT Geek. Is a legal chargeback the same as taking a Charge like a traditional lender would have a First or Second Charge on a property, or is this different?

Also now taking the same example but instead of just lending the money and receiving the money back (with or without interest), instead I receive the money back with a share of the profits, would this then trigger an 'interest' and higher SDLT?

Yes, a legal charge is the same kind of security as a traditional lender would take.

There is a danger of you being treated as a joint buyer for SDLT purposes if you share the profit (for example you might be treated as a partner).

This is one for specialist accountancy advice.

michael1234

KiwiCoop said:

A friend of mine bought a house with his new wife and just didn't bother mentioning to the solicitor that he already owned one.  If you're surprised to learn that, 7-8 years later, HMRC haven't been in touch you're giving them too much credit.

I like that. I wonder if at any point your friend was asked ?

Bonniepurple

KiwiCoop said:

A friend of mine bought a house with his new wife and just didn't bother mentioning to the solicitor that he already owned one.  If you're surprised to learn that, 7-8 years later, HMRC haven't been in touch you're giving them too much credit.

He got a new wife but failed to mention that he already had one?  That’s bigamy 🤣