Stamp Duty questions

SDLT_help_123

I wanted to ask some advice around potential stamp duty payments.

Scenario: In Dec 2019 I purchased a house with my sister for £212,000 which is now fully paid off and we now own the house mortgage free. At the time we were both first time buyers. My sister lives there as her main residence and has done since we purchased it. I do not live there and currently rent in a different city.

I'm looking to purchase a flat where I currently live for less than 250,000 and know in usual terms that would mean no stamp duty. However, I'm assuming as I still own half of the above property I would be subject to the 5% stamp duty announced in the budget. Is this still true even if the above property is not my main residence and the newly purchased flat will be?

If that is the case, would there be any tax implications to me gifting my sister my half of the property? As far as I can tell that wouldn't have CGT for her or myself as no money is changing hands and it's increasing her share of her main residence so no stamp duty liable either. 

I've read over the guidance on the gov website and pretty sure my understanding is correct (i.e. I would be liable for stamp duty) but wanted to confirm as I can't seem to find this scenario anywhere online. 

Many thanks for the help!

SDLT_Geek

SDLT_help_123 said:

I wanted to ask some advice around potential stamp duty payments.

Scenario: In Dec 2019 I purchased a house with my sister for £212,000 which is now fully paid off and we now own the house mortgage free. At the time we were both first time buyers. My sister lives there as her main residence and has done since we purchased it. I do not live there and currently rent in a different city.

I'm looking to purchase a flat where I currently live for less than 250,000 and know in usual terms that would mean no stamp duty. However, I'm assuming as I still own half of the above property I would be subject to the 5% stamp duty announced in the budget. Is this still true even if the above property is not my main residence and the newly purchased flat will be?

If that is the case, would there be any tax implications to me gifting my sister my half of the property? As far as I can tell that wouldn't have CGT for her or myself as no money is changing hands and it's increasing her share of her main residence so no stamp duty liable either. 

I've read over the guidance on the gov website and pretty sure my understanding is correct (i.e. I would be liable for stamp duty) but wanted to confirm as I can't seem to find this scenario anywhere online. 

Many thanks for the help!

If you still have a half share in the house when you complete the purchase of a flat, the extra 5% SDLT would apply.

A gift of your share of the flat would only "work" for SDLT if it is a genuine "no strings attached" gift.  You would lose (half the value of the house) much more than you save (5% of the price of the flat)!

Others will help on CGT, but I expect they will say it is a deemed market value disposal for CGT and it will be important for the calculation to know whether you had lived in the house and, if so, how long you lived there.

Bookworm105

correct you own an existing property which will not be sold before you buy an additional property
Therefore the additional rate (5%) SDLT would apply on your own purchase

You are incorrect re CGT because in tax law you and sister are "connected persons" and therefore the law sees changes in ownership fractions between such people as attempted tax evasion by sharing wealth between the family..

Therefore you would be deemed to be disposing of your share to her at current market value. As you have never lived there you would face CGT on that entire share irrespective of the fact no money changes hands.

You are correct that no SDLT would apply to the transfer of your share to sister as no money changes hands so there is no "chargeable consideration" which can be taxed

SDLT_help_123

Thanks for the responses. That does make sense, I could only seem to find scenarios involving married partners and not families.

Would it make a different with capital gains tax if I had lived there for the first year we bough it (and subsequently left for work reasons)? Would I need to prove it was my main residence at some point to show this?

Equally if we were to sell the property in the future, would capital gains tax apply to any profit made for me (I'm assuming not for my sister as it's her main residence?) 

SDLT_Geek

SDLT_help_123 said:

Thanks for the responses. That does make sense, I could only seem to find scenarios involving married partners and not families.

Would it make a different with capital gains tax if I had lived there for the first year we bough it (and subsequently left for work reasons)? Would I need to prove it was my main residence at some point to show this?

Equally if we were to sell the property in the future, would capital gains tax apply to any profit made for me (I'm assuming not for my sister as it's her main residence?) 

If you have made a genuine gift of the property, why would you be entitled to any share in the profit? 

Your disposal and CGT gain would be made at the date of the gift.

SDLT_help_123

SDLT_Geek said:

SDLT_help_123 said:

Thanks for the responses. That does make sense, I could only seem to find scenarios involving married partners and not families.

Would it make a different with capital gains tax if I had lived there for the first year we bough it (and subsequently left for work reasons)? Would I need to prove it was my main residence at some point to show this?

Equally if we were to sell the property in the future, would capital gains tax apply to any profit made for me (I'm assuming not for my sister as it's her main residence?) 

If you have made a genuine gift of the property, why would you be entitled to any share in the profit? 

Your disposal and CGT gain would be made at the date of the gift.

Ah apologies I realised that part was confusing.

I was asking if I didn't gift the property to her and instead we decided to sell, if capital gains tax would work in the same way as the property isn't currently my main residence (although has historically been).

At the time of purchase it seemed smart to get on the property ladder but I was a little naive to things like CGT and the impact that might have on future financial choices!

Bookworm105

SDLT_help_123 said:

SDLT_Geek said:

SDLT_help_123 said:

Thanks for the responses. That does make sense, I could only seem to find scenarios involving married partners and not families.

Would it make a different with capital gains tax if I had lived there for the first year we bough it (and subsequently left for work reasons)? Would I need to prove it was my main residence at some point to show this?

Equally if we were to sell the property in the future, would capital gains tax apply to any profit made for me (I'm assuming not for my sister as it's her main residence?) 

If you have made a genuine gift of the property, why would you be entitled to any share in the profit? 

Your disposal and CGT gain would be made at the date of the gift.

Ah apologies I realised that part was confusing.

I was asking if I didn't gift the property to her and instead we decided to sell, if capital gains tax would work in the same way as the property isn't currently my main residence (although has historically been).

At the time of purchase it seemed smart to get on the property ladder but I was a little naive to things like CGT and the impact that might have on future financial choices!

CGT is very simple: you own it for total a period of time. That period may be split into the % of time it was lived in as main home, and % of time it was not lived in.

Moving in or out simply changes the relative size of the "not lived in" %, it does not cancel out the liability as there will always be a period you never lived it whilst owning it and that is always liable for CGT.

saajan_12

SDLT_help_123 said:

If that is the case, would there be any tax implications to me gifting my sister my half of the property? As far as I can tell that wouldn't have CGT for her or myself as no money is changing hands and it's increasing her share of her main residence so no stamp duty liable either. 

You would pay CGT on the market value of your share of for the % of time you didn't live there. The rationale is your investment gained £x in value, so you're taxed on that profit. Its your choice if you then choose to gift that higher value asset. 
Sister would pay SDLT on the amount she pays you - so if its a gift then £0 (regardless of main residence or not). But if you've paid for the mortgage or invested at the start, would you not want something for your share? 

SDLT_help_123 said:

SDLT_Geek said:

SDLT_help_123 said:

Thanks for the responses. That does make sense, I could only seem to find scenarios involving married partners and not families.

Would it make a different with capital gains tax if I had lived there for the first year we bough it (and subsequently left for work reasons)? Would I need to prove it was my main residence at some point to show this?

Equally if we were to sell the property in the future, would capital gains tax apply to any profit made for me (I'm assuming not for my sister as it's her main residence?) 

If you have made a genuine gift of the property, why would you be entitled to any share in the profit? 

Your disposal and CGT gain would be made at the date of the gift.

Ah apologies I realised that part was confusing.

I was asking if I didn't gift the property to her and instead we decided to sell, if capital gains tax would work in the same way as the property isn't currently my main residence (although has historically been).

At the time of purchase it seemed smart to get on the property ladder but I was a little naive to things like CGT and the impact that might have on future financial choices!

Mmhm as we see all too often. You've also lost most FTB benefits.