Stamp Duty - Shared Ownership

alessandro

Hi all

I have been reading article after article to work out what I would pay in stamp duty and i'm just getting more and more confused. Maths was never my strongest suit and stuff like this just confuses me so I am hoping for some help from the wonderful people here.

In 2017 I paid £96k for 40% of my current property (value £240,000). From 1st April I will be paying £381.02 in rent.

I have recently had a valuation and imagine it will be around £245,000-250,000 as a full valuation and I am considering buying the full 100% of the property.

If I were to buy only 80% would I have to save up the same amount or more to then staircase to 100% when I have the funds?

Any help would be greatly appreciated.

SDLT_Geek

alessandro said:

Hi all

I have been reading article after article to work out what I would pay in stamp duty and i'm just getting more and more confused. Maths was never my strongest suit and stuff like this just confuses me so I am hoping for some help from the wonderful people here.

In 2017 I paid £96k for 40% of my current property (value £240,000). From 1st April I will be paying £381.02 in rent.

I have recently had a valuation and imagine it will be around £245,000-250,000 as a full valuation and I am considering buying the full 100% of the property.

If I were to buy only 80% would I have to save up the same amount or more to then staircase to 100% when I have the funds?

Any help would be greatly appreciated.

The short answer is that SDLT on staircasing a shared ownership property only applies when staircasing to over 80%, so if you staircase now from 40% to 80% (presumably paying £98,000 - £100,000) there would be no SDLT to pay at that stage.

For a fuller answer more information would be needed:

The property is in England? (So the relevant stamp duty is stamp duty land tax?)

When you bought in 2017 did you buy from a social landlord? (Or perhaps you bought from a previous owner who was not a social landlord?)

If the former, did you elect to pay SDLT on the then market value of £240,000?  (The alternative would have been for SDLT to be worked on the £96,000 and the net present value of the rents.)

The following calculation might help you.  I am assuming that the property is in England, it was bought from a social landlord in 2017 and no election was made to pay SDLT on the market value.  I assume you have no other property interests so standard rates of SDLT apply.  Also that you decide now to staircase out to 100% and you pay for the 60% extra the sum of £150,000.  The calculation of SDLT payable on staircasing out gives £1,476 and it is worked out like this:

The total sums paid in linked transactions is £96K + £150K = £246K.

SDLT on £246K at standard rates would be £2,420.

But the amount of SDLT payable is a fraction of this.  The fraction is £150K / £246K

That gives SDLT due on staircasing out in one go of £1,476.

alessandro

Hi

Wow thank you for your help thus far you are an absolute star. 

For a little more context I will add the valuation came back at £250,000 and I have no other properties. I also assume it's irrelevant my partner is a first time buyer.

The property is in England and was purchased from the leaseholder who purchased at a premium of £71,000 from the social landlord (Southern Housing).

At the point I purchased for 96,000 I did not pay any stamp duty.

The figure quoted would be amazing and much less than I expected (I am a maths ignoramus and my figures were wild and all over the place!)

Thank you again

Kind regards
Alex

SDLT_Geek

alessandro said:

Hi

Wow thank you for your help thus far you are an absolute star. 

For a little more context I will add the valuation came back at £250,000 and I have no other properties. I also assume it's irrelevant my partner is a first time buyer.

The property is in England and was purchased from the leaseholder who purchased at a premium of £71,000 from the social landlord (Southern Housing).

At the point I purchased for 96,000 I did not pay any stamp duty.

The figure quoted would be amazing and much less than I expected (I am a maths ignoramus and my figures were wild and all over the place!)

Thank you again

Kind regards
Alex

The section I have put in bold makes a big difference to the SDLT analysis.

(a)  If the first leaseholder elected to pay SDLT on the full market value at the time of their taking the lease, there will  be no SDLT for you to pay on staircasing.

(b)  Otherwise SDLT will be due if you staircase out for the remaining 60%, paying £150,000.  But that staircasing transaction is not linked to another transaction.  So SDLT is worked out on £150,000.  That gives a payment of SDLT due of £500.

alessandro

Ah brilliant thank you again You are an absolute star.

Is there any way to find out if the original leaseholder paid stamp duty originally?

SDLT_Geek

alessandro said:

Ah brilliant thank you again You are an absolute star.

Is there any way to find out if the original leaseholder paid stamp duty originally?

The first thing is to check the file from the time of your purchase, as the question should have been asked of the seller.

The wording of the lease should give you a clue, as the template lease has an either / or clause for whether the original buyer had elected to pay SDLT on the market value.  This should be treated with caution though, because this clause is often not correctly completed.

alessandro

Ah brilliant thank you.

Would it be a safe bet to just pay stamp duty to prevent any fines etc if I can't ascertain whether it was paid or would HMRC have a record or something?

I am sorry if I am coming across stupid this is all new to me and technical and maths combined makes my brain scrambled

SDLT_Geek

alessandro said:

Ah brilliant thank you.

Would it be a safe bet to just pay stamp duty to prevent any fines etc if I can't ascertain whether it was paid or would HMRC have a record or something?

I am sorry if I am coming across stupid this is all new to me and technical and maths combined makes my brain scrambled

There is a good argument for paying the £500 SDLT on the basis that it might be time consuming (and likely inconclusive) to find out about your seller's SDLT decisions at the time of their purchase.

HMRC would not release information to you about another party's tax affairs.

alessandro

That's fair enough totally didn't think of that. The flat was valued at £185,000 at time of purchase in 2014 and there is no way, from the paperwork, to determine is she paid stamp duty when she purchased her 40%. 

There is a part in the lease about stamp duty saying for the purposes of the paragraph 4 of schedule 9 of the finance act 2003. The landlord and the leaseholder confirm that the premium obtainable on the open market for the premises (by reference to which the premium is calculated) is the initial market value and the minimum rent payable is the minimum rent and that the leaseholder intends stamp duty land tax to be charged in accordance with the said paragraph 4 of schedule 9 by reference to the initial market value and to the minimum rent.

But I presume that's just a bog standard thing rather than saying she needs to pay it?

I think the safer and quicker route is just to pay the damn thing as my heads already fried even thinking about it.

alessandro

Thank you though your information has been brilliant and your helpfulness so much appreciated

SDLT_Geek

alessandro said:

That's fair enough totally didn't think of that. The flat was valued at £185,000 at time of purchase in 2014 and there is no way, from the paperwork, to determine is she paid stamp duty when she purchased her 40%. 

There is a part in the lease about stamp duty saying for the purposes of the paragraph 4 of schedule 9 of the finance act 2003. The landlord and the leaseholder confirm that the premium obtainable on the open market for the premises (by reference to which the premium is calculated) is the initial market value and the minimum rent payable is the minimum rent and that the leaseholder intends stamp duty land tax to be charged in accordance with the said paragraph 4 of schedule 9 by reference to the initial market value and to the minimum rent.

But I presume that's just a bog standard thing rather than saying she needs to pay it?

I think the safer and quicker route is just to pay the damn thing as my heads already fried even thinking about it.

That clause you have quoted is the one which is consistent with an election having been made in 2014 for SDLT to be paid on the full market value. It is however inconclusive, as we find that clause is not always completed correctly.