Ways of reducing the stamp duty?

Bookworm225

tloz123 said:

Bookworm225 said:

p00hsticks said:

Also think that d) may possibly involve some CGT having to be paid ?

since the property appears to be now let that is correct, CGT would be triggered on transfer (using current market value as it involves a "connected person" - mother!)

Ah interesting. So HMRC defines “connected person” as family?

CG14580 - Connected persons - HMRC internal manual - GOV.UK

Bookworm225

tloz123 said:

saajan_12 said:. 

d) No, its based on beneficial interest so if you remain on the mortgage you'll be seen to still effectively own the property, so the new property is a 2nd property for the couple, so higher rate SDLT. 

But what if I have a deed of trust to explicitly show that I don’t want anything from my current property? I.e. not showing financial interest

then you would lose the rental income and your mother would have to take on legal responsibility of being the landlord (you could act as her agent to do the actual work, but cannot keep the rent for yourself). 

You would, as previously mentioned, also have to pay CGT at point of change of ownership (transfer of beneficial interest). And as others have mentioned, mother might still have to pay SDLT on transfer of the beneficial ownership to her anyway depending on size of her "share" of the mortgage value (ie if >40k)

SDLTM09815 - SDLT - higher rates for additional dwellings: interests treated as owned by an individual, trusts, children [including children subject to the Mental Health Acts] - HMRC internal manual - GOV.UK

Neil49

Just to add that your solicitor will require full details of your finances for money laundering purposes. We recently purchased a house and it was a bit like an interrogation when it came to source of funds. Our buyer was also subject to that because his elderly father had loaned him £10k to help with the purchase. He had to go to the solicitor with his father for him to provide proof of where the funds had come from. 

_Penny_Dreadful

tloz123 said:

I’m wondering if the stamp duty would be reduced if we do any of the following:
- I transfer my current property and the mortgage to her. I then buy the property we’re looking at with me as the sole owner and sole name on the mortgage (I’m told I’ll be able to get a mortgage with just my salary alone)
- We do a sole proprietor joint mortgage on the house we’re looking to buy.
- Sell my current house and buy one together.
- Transfer my current property to my mum but keep me in the mortgage, and then buy the other property with my wife.

Is there anything I could do to reduce the tax bill?

As others have already said, most of your proposed options are going to work.  You say stamp duty so I'm going to assume the properties are in England or Northern Ireland where the applicable tax is SDLT.

• First option won't work because you're a married couple.  As such all properties owned by one or both of you are taken into consideration for the higher rate of SDLT.  As a married couple you already own one residential property between you and at the end of the transaction you'll own two residential properties between you, therefore the higher rate of SDLT will apply.
• Second option won't work for the same reason that option 1 fails.
  
• This option would avoid the higher rate of SDLT but you'll need to sell it before completing the purchase of your new home.  Was the property you already own your main residence at any point in the last 3 years?
• Your last option will not work either.  Firstly, the mortgage lender isn't going to allow you to transfer legal ownership of the property to your mother.  Secondly, SDLT is based on beneficial ownership rather than legal ownership so only changing legal ownership wouldn't help.
  

You could consider setting up a limited company and selling the current property to it before completing the purchase of your new home.  Disposing of the property might trigger a CGT liability for you and on purchasing the property from you the limited company will have to pay the higher rate of SDLT but if that SDLT is less than paying the higher rate of SDLT on the purchase of the new it might be worth it.  It can also be beneficial for higher rate tax payers to put their rental properties into limited companies but you'd really need to sit down with an accountant to work it out.

Mutton_Geoff

When you purchase a property, get the seller to itemise and value all of the chattels (carpets, curtains, freestanding white goods, garden shed, fuel oil etc). Get your solicitor to account for these separately in the transaction as SDLT is not due on these items although the majority of people end up paying it.

No point paying HMRC up to 12% of the value of second hand carpets when you move in. I saved my purchaser a couple of grand doing this on my last sale.

BikingBud

Mutton_Geoff said:

When you purchase a property, get the seller to itemise and value all of the chattels (carpets, curtains, freestanding white goods, garden shed, fuel oil etc). Get your solicitor to account for these separately in the transaction as SDLT is not due on these items although the majority of people end up paying it.

No point paying HMRC up to 12% of the value of second hand carpets when you move in. I saved my purchaser a couple of grand doing this on my last sale.

If they are removed from the house sale, how would they be funded then? 

Are they likely to be covered by the mortgage or separate funding required?

Bookworm225

BikingBud said:

Mutton_Geoff said:

When you purchase a property, get the seller to itemise and value all of the chattels (carpets, curtains, freestanding white goods, garden shed, fuel oil etc). Get your solicitor to account for these separately in the transaction as SDLT is not due on these items although the majority of people end up paying it.

No point paying HMRC up to 12% of the value of second hand carpets when you move in. I saved my purchaser a couple of grand doing this on my last sale.

If they are removed from the house sale, how would they be funded then? 

Are they likely to be covered by the mortgage or separate funding required?

you misunderstand, you pay one total amount but on the SDLT return you declare only the chargeable consideration figure for tax purposes, chattels are not part of that figure.

Mutton_Geoff

BikingBud said:

Mutton_Geoff said:

When you purchase a property, get the seller to itemise and value all of the chattels (carpets, curtains, freestanding white goods, garden shed, fuel oil etc). Get your solicitor to account for these separately in the transaction as SDLT is not due on these items although the majority of people end up paying it.

No point paying HMRC up to 12% of the value of second hand carpets when you move in. I saved my purchaser a couple of grand doing this on my last sale.

If they are removed from the house sale, how would they be funded then? 

Are they likely to be covered by the mortgage or separate funding required?

Bookworm kindly answered for me. No difference to price paid, it's an accounting trick to be performed by the conveyancer to Land Registry but may not work if someone is up against max LTV.

user1977

Mutton_Geoff said:

BikingBud said:

Mutton_Geoff said:

When you purchase a property, get the seller to itemise and value all of the chattels (carpets, curtains, freestanding white goods, garden shed, fuel oil etc). Get your solicitor to account for these separately in the transaction as SDLT is not due on these items although the majority of people end up paying it.

No point paying HMRC up to 12% of the value of second hand carpets when you move in. I saved my purchaser a couple of grand doing this on my last sale.

If they are removed from the house sale, how would they be funded then? 

Are they likely to be covered by the mortgage or separate funding required?

Bookworm kindly answered for me. No difference to price paid, it's an accounting trick to be performed by the conveyancer to Land Registry but may not work if someone is up against max LTV.

It also won't make much difference if the chattels are of a typical value - if your buyer saved £2k then those must have been immensely expensive second-hand carpets etc...

Mutton_Geoff

user1977 said:

It also won't make much difference if the chattels are of a typical value - if your buyer saved £2k then those must have been immensely expensive second-hand carpets etc...

It was a rebuild project I sold for £1.8m with mostly new carpets etc, so yes, they were expensive. Most gutting thing was the new owner ripped out the brand new kitchen I'd fitted at a cost of 60K because they didn't like it!

In any case, back to the title of this post, it's still a viable way to reduce stamp duty, even on the most humble transaction because even a £100 saving is a reasonable chunk to many.