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guyjamelin
Posts: 4 Newbie
Hello all
Maybe some of you will be able to shed some light on my problem:
I bought my shared ownership flat in 2014 by buying a 171k share (45%) of a flat which value was £380k at the time. At the time I paid stamp duty on the £171k at 1% = £1,710
I am now looking to sell this flat which current value has increased to £510k. My 45% share is then now worth £229.5k. After a 2 months period where my housing association has been trying to sell the flat but failed I'm now looking to sell on the open market.
I understand that to do so would involve a "back to back" staircasing where I would buy the remaining 55% share from the housing association so that I own 100% of the flat. The ownership of the flat would then be immediately transfered to the private buyer as would have been agreed before i.e. I would only be staircasing to 100% if I have found a willing buyer to take the flat immediately off my hands. In practice this means I will own 100% of the flat for a few seconds.
My questions are:
1) how much stamp duty would I be required to pay if any?
2) would sub sale relied apply to the back to back staircasing and would this mean I shouldn't pay any stamp duty as the private buyer would be paying it (to avoid a tax double burden)?
I am looking forward to your responses.
Maybe some of you will be able to shed some light on my problem:
I bought my shared ownership flat in 2014 by buying a 171k share (45%) of a flat which value was £380k at the time. At the time I paid stamp duty on the £171k at 1% = £1,710
I am now looking to sell this flat which current value has increased to £510k. My 45% share is then now worth £229.5k. After a 2 months period where my housing association has been trying to sell the flat but failed I'm now looking to sell on the open market.
I understand that to do so would involve a "back to back" staircasing where I would buy the remaining 55% share from the housing association so that I own 100% of the flat. The ownership of the flat would then be immediately transfered to the private buyer as would have been agreed before i.e. I would only be staircasing to 100% if I have found a willing buyer to take the flat immediately off my hands. In practice this means I will own 100% of the flat for a few seconds.
My questions are:
1) how much stamp duty would I be required to pay if any?
2) would sub sale relied apply to the back to back staircasing and would this mean I shouldn't pay any stamp duty as the private buyer would be paying it (to avoid a tax double burden)?
I am looking forward to your responses.
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Comments
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Not actually answering the question, but you can just sell your share. I did.No problem at all.0
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Hi The_quick
Yes I can just sell my share which is what I have been doing for now. This is my option A. However it's quite a large share (£230k) for a one bedroom flat. Given my housing association financial assessment requirements it appears difficult to find people who qualify to buy my share. They'd need to be an individual with a large deposit or couple and it's a one bed flat so could be seen as too small for two people.
So I'm also now looking at option B which prompted my question on this forum.
Cheers0 -
But even if you own 100% of it, it is still a one bed flat. So still only suitable for a singleton or a couple.
Arguably they would need a bigger deposit to buy the 100% share than the current 50%.0 -
Thank you for your response Mije
The point of my post is more to do with whether sub-sale relief applies in my case and the amount of stamp duty I would need to pay (if any) in the scenario where I secure a buyer on the open market rather than on the shared owner market (the latter being increasingly unlikely if I am to believe my experience over the last 2 months).
The shared owner market is (rightfully) restricted by a maximum income cap which makes a property difficult to sell when its value increases beyond a certain level hence why I'm now looking to sell on the open market.0 -
[FONT=Verdana, sans-serif]I think you need to research Sub Sale relief:
[/FONT] [FONT=Verdana, sans-serif]https://www.gov.uk/government/publications/stamp-duty-land-tax-sdlt-pre-completion-transactions-rules[/FONT]
[FONT=Verdana, sans-serif]https://www.telegraph.co.uk/finance/personalfinance/tax/11715364/We-have-to-pay-7000-stamp-duty-to-sell-our-shared-ownership-flat.-Can-we-avoid-it.html[/FONT]0 -
You dont pay stamp duty on selling.....0
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Hi NineDeuce
You are correct however in the context of a back to back staircasing I would be increasing my share from 45% to 100% to then sell the 100% to the open market buyer. So I would need to buy and sell at the same time albeit selling more than I'm buying.
What I'm trying to clarify is whether subsale relief would apply in my case. If it doesn't apply I would have to pay stamp duty on the 55% share I would have bought (even if I own it for a few seconds) and then the open market buyer would have to pay stamp duty as well which sounds ludicrous (double tax burden).
Tom99 very helpful links seem to clarify that in my situation I shouldn't be paying stamp duty. Now I need to make sure I don't by studying the rules on HMRC website.0 -
The tax on the £280,500 you are paying (55% of £510,000) is £7,812.
This is worked out as follows:
First add the sums paid: £171,00 and £280,500 is £451,500.
Work out the SDLT that would be due on a purchase for £451,500:
first £125,000 at 0% is £0
next £125,000 at 2% is £2,500
remaining £201,500 at 5% is £10,075
Total £12,575 (assuming normal rates, not higher rates)
Now take the proportion of that relating to the sum paid now:
280,500 / 451,500 x £12,575 = £7,812
Subsale relief is not available as the "subject matter" of what is bought in is not the same as the "subject matter of what is sold on. In one case a rent reduction is being bought, on the other a lease is being assigned.0 -
guyjamelin wrote: »Hi NineDeuce
You are correct however in the context of a back to back staircasing I would be increasing my share from 45% to 100% to then sell the 100% to the open market buyer. So I would need to buy and sell at the same time albeit selling more than I'm buying.
What I'm trying to clarify is whether subsale relief would apply in my case. If it doesn't apply I would have to pay stamp duty on the 55% share I would have bought (even if I own it for a few seconds) and then the open market buyer would have to pay stamp duty as well which sounds ludicrous (double tax burden).
Tom99 very helpful links seem to clarify that in my situation I shouldn't be paying stamp duty. Now I need to make sure I don't by studying the rules on HMRC website.
I wouldnt agree with that. The argument is why should you be able to buy a property with no stamp duty when everybody else does. It is just the same as any other house sale. The fact that it is happening in quick succession should be irrelevant.0 -
Subsale relief is not available as the "subject matter" of what is bought in is not the same as the "subject matter of what is sold on. In one case a rent reduction is being bought, on the other a lease is being assigned.
[FONT=Verdana, sans-serif]Would subsale relief might be available if the transaction is set up correctly?
[/FONT] [FONT=Verdana, sans-serif]The OP would have a contract to buy the remaining 55% share, they then assign the rights to complete that contract to the eventual purchaser.
[/FONT] [FONT=Verdana, sans-serif]The subject matter being bought/sold on is the same ie 55% share.[/FONT]0
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