Stamp duty question regarding second home reclaim

CharlieCheeze

I understand the rules on claiming back the stamp duty paid on a second home if I sell my original residence within 3 years. However, I am considering selling it as a share (75% / 25% share for instance), with me still holding the smaller percentage. I'm trying to help a couple get on the ladder.

Does anyone have a clear understanding of what happens in this situation? Will I be able to claim back the second home stamp duty still?

I never seem to do things the straight forward way, hence not being able to find an answer to this on the net 🙄

Any help gratefully received.

SDLT_Geek

CharlieCheeze said:

I understand the rules on claiming back the stamp duty paid on a second home if I sell my original residence within 3 years. However, I am considering selling it as a share (75% / 25% share for instance), with me still holding a percentage. 

Does anyone have a clear understanding of what happens in this situation? Will I be able to claim back the second home stamp duty still?

I never seem to do things the straight forward way, hence not being able to find an answer to this on the net 🙄

Any help gratefully received.

Is the property you bought in England so the relevant stamp duty is stamp duty land tax?  If so, it is clear that you would need to dispose of all of your interest in your old home in order to be entitled to a refund.

You could have a look at the set of four conditions in the guidance here: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09800

CharlieCheeze

SDLT_Geek said:

CharlieCheeze said:

I understand the rules on claiming back the stamp duty paid on a second home if I sell my original residence within 3 years. However, I am considering selling it as a share (75% / 25% share for instance), with me still holding a percentage. 

Does anyone have a clear understanding of what happens in this situation? Will I be able to claim back the second home stamp duty still?

I never seem to do things the straight forward way, hence not being able to find an answer to this on the net 🙄

Any help gratefully received.

Is the property you bought in England so the relevant stamp duty is stamp duty land tax?  If so, it is clear that you would need to dispose of all of your interest in your old home in order to be entitled to a refund.

You could have a look at the set of four conditions in the guidance here: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09800

Yes, sorry I should have mentioned it's SDLT. Thank you very much for the link I will have a good read of it. It sounds like I may not be able to help get someone on the ladder and they may be trapped renting. 

CharlieCheeze

@SDLT_Geek

Just reading through that link you kindly provided, it would seem that if I can keep my interest in my old property at less than £40K, then I should be able to claim the refund in full?

SDLT_Geek

CharlieCheeze said:

@SDLT_Geek

Just reading through that link you kindly provided, it would seem that if I can keep my interest in my old property at less than £40K, then I should be able to claim the refund in full?

If you dispose of enough of your old home before you buy a new home so that your retained share is worth less than £40K when you buy the new home, then the extra 5% SDLT is not due in the first place.

If however the extra 5% is due on the purchase, then you would have to dispose of it all in order to get the extra 5% back.

CharlieCheeze

SDLT_Geek said:

CharlieCheeze said:

@SDLT_Geek

Just reading through that link you kindly provided, it would seem that if I can keep my interest in my old property at less than £40K, then I should be able to claim the refund in full?

If you dispose of enough of your old home before you buy a new home so that your retained share is worth less than £40K when you buy the new home, then the extra 5% SDLT is not due in the first place.

If however the extra 5% is due on the purchase, then you would have to dispose of it all in order to get the extra 5% back.

8ugger, I did wonder. Thanks once again.

user1977

Any reason why you need to retain ownership, rather than, say, registering a charge over the property for the amount of the discount?

CharlieCheeze

user1977 said:

Any reason why you need to retain ownership, rather than, say, registering a charge over the property for the amount of the discount?

I haven't really looked in to the various ways of doing it. I will have a look at that, thanks, but I'm assuming at this stage that the effect of not getting my 5% back on the second home might be the same? Also, I'm pretty sure the buyers mortgage provider might not like the idea as it may be a conflict of interests.

user1977

CharlieCheeze said:

user1977 said:

Any reason why you need to retain ownership, rather than, say, registering a charge over the property for the amount of the discount?

I haven't really looked in to the various ways of doing it. I will have a look at that, thanks, but I'm assuming at this stage that the effect of not getting my 5% back on the second home might be the same? Also, I'm pretty sure the buyers mortgage provider might not like the idea as it may be a conflict of interests.

I was assuming no mortgage involved, as you being a part-owner would definitely rule that out (assuming you weren't wanting to sign up to their mortgage too). I think some lenders will accept this sort of second charge, maybe one more for the mortgages board.

SDLT_Geek

CharlieCheeze said:

user1977 said:

Any reason why you need to retain ownership, rather than, say, registering a charge over the property for the amount of the discount?

I haven't really looked in to the various ways of doing it. I will have a look at that, thanks, but I'm assuming at this stage that the effect of not getting my 5% back on the second home might be the same? Also, I'm pretty sure the buyers mortgage provider might not like the idea as it may be a conflict of interests.

An example might help.  Say your house is worth £200,000 and you are prepared to lend them back 25% of the value, that is £50,000.  So they need £150,000 on top of the costs of moving.  

Say they have £40,000 available and want to borrow £110,000.

Their purchase would look like this:

• It would be for a price of £200,000
• Of which they put in £40,000
• A commercial lender lends them £110,000 against a first charge on the property
• You lend them £50,000 against a second charge on the property
• A deed of priority (or deed of postponement) makes clear that the commercial lender's security ranks ahead of yours.

Not all commercial lenders would lend on those terms, but a mortgage broker might well be able to find the buyers a lender who would.  The buyers would need to make the running on this, once you outline the basis on which you would be prepared to sell to them.

CharlieCheeze

SDLT_Geek said:

CharlieCheeze said:

user1977 said:

Any reason why you need to retain ownership, rather than, say, registering a charge over the property for the amount of the discount?

I haven't really looked in to the various ways of doing it. I will have a look at that, thanks, but I'm assuming at this stage that the effect of not getting my 5% back on the second home might be the same? Also, I'm pretty sure the buyers mortgage provider might not like the idea as it may be a conflict of interests.

An example might help.  Say your house is worth £200,000 and you are prepared to lend them back 25% of the value, that is £50,000.  So they need £150,000 on top of the costs of moving.  

Say they have £40,000 available and want to borrow £110,000.

Their purchase would look like this:

• It would be for a price of £200,000
• Of which they put in £40,000
• A commercial lender lends them £110,000 against a first charge on the property
• You lend them £50,000 against a second charge on the property
• A deed of priority (or deed of postponement) makes clear that the commercial lender's security ranks ahead of yours.

Not all commercial lenders would lend on those terms, but a mortgage broker might well be able to find the buyers a lender who would.  The buyers would need to make the running on this, once you outline the basis on which you would be prepared to sell to them.

Thanks, very informative illustration. Problem is, the couple in question are currently renting and have little to no deposit. Still not impossible I suppose, but I also need to keep my interest below £40K at market value. It's an interesting view and I take it on board. The primary lender would certainly have the majority interest. That would be circa 80% I will run these ideas past them and see if they can secure a mortgage in principal on similar terms.

It would seem the rules on SDLT would also dictate that this need to happen fast as I'm likely to purchase the second property within 6 weeks. If it's meant to be it is.

Many thanks for your input!