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    • relaxtwotribes
    • By relaxtwotribes 25th May 19, 11:12 AM
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    relaxtwotribes
    Bank of Mum & Dad and FTB Stamp Duty Relief
    • #1
    • 25th May 19, 11:12 AM
    Bank of Mum & Dad and FTB Stamp Duty Relief 25th May 19 at 11:12 AM
    Could someone tell me, please, if a First Time Buyer buys a property with the assistance of a loan from the Bank of Mum & Dad (no commercial mortgage provider involved) will the buyer obtain FTB Relief from Stamp Duty? The loan will be unsecured and Mum & Dad will have no beneficial interest, equitable interest, rights to proceeds of sale or another interest. Thanks.
Page 1
    • GavL
    • By GavL 25th May 19, 11:31 AM
    • 34 Posts
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    GavL
    • #2
    • 25th May 19, 11:31 AM
    • #2
    • 25th May 19, 11:31 AM
    As I understand the loan would need to be “gifted” with no interest from parents in the property.
    With the repayment terms of it then being worked out personally between ftb and parents.
    • davidmcn
    • By davidmcn 25th May 19, 11:52 AM
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    davidmcn
    • #3
    • 25th May 19, 11:52 AM
    • #3
    • 25th May 19, 11:52 AM
    Yes, where the FTB gets their money from is irrelevant.
    • getmore4less
    • By getmore4less 25th May 19, 11:54 AM
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    getmore4less
    • #4
    • 25th May 19, 11:54 AM
    • #4
    • 25th May 19, 11:54 AM
    As you don't need a mortgage you are just buying as if you were a cash buyer.

    the money does not need to be gifted it can be an interest free loan.
    • AnotherJoe
    • By AnotherJoe 25th May 19, 12:33 PM
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    AnotherJoe
    • #5
    • 25th May 19, 12:33 PM
    • #5
    • 25th May 19, 12:33 PM
    Even if it was secured i think you'd still be OK.

    I dont see any requirement for there to be a mortgage or cash buyers not being eligible..
    • relaxtwotribes
    • By relaxtwotribes 25th May 19, 12:43 PM
    • 266 Posts
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    relaxtwotribes
    • #6
    • 25th May 19, 12:43 PM
    • #6
    • 25th May 19, 12:43 PM
    Yes, where the FTB gets their money from is irrelevant.
    Originally posted by davidmcn
    As you don't need a mortgage you are just buying as if you were a cash buyer.

    the money does not need to be gifted it can be an interest free loan.
    Originally posted by getmore4less
    Even if it was secured i think you'd still be OK.

    I dont see any requirement for there to be a mortgage or cash buyers not being eligible..
    Originally posted by AnotherJoe
    Many thanks for your prompt replies, which confirm my thoughts exactly. I have been in correspondence with HMRC who confirm that the existence of a legal charge (there isn't one) would not disqualify a FTB from FTB relief from Stamp Duty, but rather bizarrely the FTB's solicitors seem to think that the loan itself would cause disqualification.
    • SDLT Geek
    • By SDLT Geek 25th May 19, 1:58 PM
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    SDLT Geek
    • #7
    • 25th May 19, 1:58 PM
    • #7
    • 25th May 19, 1:58 PM
    There is an article about SDLT and first time buyer's relief here. https://www.blakemorgan.co.uk/news-events/blog/sdlt-first-time-buyers-relief/ It supports your view that a loan does not cause a problem, it is only the property owning history of the buyer which is relevant.
    • davidmcn
    • By davidmcn 25th May 19, 2:35 PM
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    davidmcn
    • #8
    • 25th May 19, 2:35 PM
    • #8
    • 25th May 19, 2:35 PM
    the FTB's solicitors seem to think that the loan itself would cause disqualification.
    Originally posted by relaxtwotribes
    Have they explained their rationale?
    • Thrugelmir
    • By Thrugelmir 25th May 19, 4:24 PM
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    Thrugelmir
    • #9
    • 25th May 19, 4:24 PM
    • #9
    • 25th May 19, 4:24 PM
    Could someone tell me, please, if a First Time Buyer buys a property with the assistance of a loan from the Bank of Mum & Dad (no commercial mortgage provider involved) will the buyer obtain FTB Relief from Stamp Duty? The loan will be unsecured and Mum & Dad will have no beneficial interest, equitable interest, rights to proceeds of sale or another interest. Thanks.
    Originally posted by relaxtwotribes
    The transaction though is not at arms length. You are in effect connected parties. Therefore not acting in your own self interests, i.e. independently.
    “The stock market is a device for transferring money from the impatient to the patient.” – Warren Buffett
    • SDLT Geek
    • By SDLT Geek 26th May 19, 5:52 AM
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    SDLT Geek
    The transaction though is not at arms length. You are in effect connected parties. Therefore not acting in your own self interests, i.e. independently.
    Originally posted by Thrugelmir
    Whilst this is true I do not see that it affects the SDLT treatment if it is clear that the parents will have no beneficial interest, equitable interest, rights to proceeds of sale or another interest in the property, but merely the benefit of a loan (with or without security for the loan).
    • AnotherJoe
    • By AnotherJoe 26th May 19, 6:16 AM
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    AnotherJoe
    Many thanks for your prompt replies, which confirm my thoughts exactly. I have been in correspondence with HMRC who confirm that the existence of a legal charge (there isn't one) would not disqualify a FTB from FTB relief from Stamp Duty, but rather bizarrely the FTB's solicitors seem to think that the loan itself would cause disqualification.
    Originally posted by relaxtwotribes
    Ask them to show you the relevant section in the law which states that a private loan disqualifies. Given that the words "mortgage" and "loan" don't even appear in the law (AFAICS) , and that the parents have no beneficial interest in the house, they appear to be making things up as they go.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • Thrugelmir
    • By Thrugelmir 26th May 19, 2:00 PM
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    Thrugelmir
    Whilst this is true I do not see that it affects the SDLT treatment if it is clear that the parents will have no beneficial interest, equitable interest, rights to proceeds of sale or another interest in the property, but merely the benefit of a loan (with or without security for the loan).
    Originally posted by SDLT Geek
    I merely made an observation in light of the solicitor's view. Perhaps there's more to the tale than we know.
    “The stock market is a device for transferring money from the impatient to the patient.” – Warren Buffett
    • chunkytfg
    • By chunkytfg 27th May 19, 5:44 PM
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    chunkytfg
    Have they explained their rationale?
    Originally posted by davidmcn
    Perhaps they think the parents are to be named on the title of the property and thus making it a joint purchase? Plus this would make it eligible for the additional 3%
    Those who risk nothing, Do nothing, achieve nothing, become nothing
    MFW #63 £0/£500
    • relaxtwotribes
    • By relaxtwotribes 28th May 19, 9:08 AM
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    relaxtwotribes
    I merely made an observation in light of the solicitor's view. Perhaps there's more to the tale than we know.
    Originally posted by Thrugelmir
    No there isn't.
    • relaxtwotribes
    • By relaxtwotribes 28th May 19, 9:11 AM
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    relaxtwotribes
    Have they explained their rationale?
    Originally posted by davidmcn
    Not yet, but with completion scheduled for 31 May, they need to decide. I will post the result later.
    • relaxtwotribes
    • By relaxtwotribes 30th May 19, 2:24 PM
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    relaxtwotribes
    The solicitors have come back after contacting HMRC to say that the purchasers will qualify for FTB relief provided that a legal charge is not registered. Which differs from my correspondence from HMRC which indicated that a legal charge did not cause a problem.
    Anyway, completion is all set now with FTB relief available.

    I have no idea what the effect would be of registering a legal charge post completion (say, in 3 months) without solicitors being involved. Hey ho.
    • kingstreet
    • By kingstreet 30th May 19, 5:17 PM
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    kingstreet
    Using that logic a residential mortgage which would always require a first charge over the property would trigger SDLT.

    This is patently nonsense.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • relaxtwotribes
    • By relaxtwotribes 1st Jun 19, 1:26 PM
    • 266 Posts
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    relaxtwotribes
    I think that the difference is that The Bank of Mum and Dad are connected persons and might be using their son/daughter as a front for their own (second?) property. Thereby avoiding the extra 3% stamp duty AND gaining the FTB relief. So, I can kinda see where HMRC is coming from.
    • jennifernil
    • By jennifernil 1st Jun 19, 3:14 PM
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    jennifernil
    I don't see how that could be inferred if the property is solely in the name of the child.

    If you are not putting a charge on the property then at least make sure the money is recorded as a loan, if that is what it is to be, that the interest rate (if any) is agreed, and the repayment terms, with all parties signing in front of a witness.
    • relaxtwotribes
    • By relaxtwotribes 1st Jun 19, 4:02 PM
    • 266 Posts
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    relaxtwotribes
    If you are not putting a charge on the property then at least make sure the money is recorded as a loan, if that is what it is to be, that the interest rate (if any) is agreed, and the repayment terms, with all parties signing in front of a witness.
    Originally posted by jennifernil
    Also Events of Default, Covenants, Negative Covenants etc. All good advice.

    In our case the FTB has 90% to put down and the loan is only 10%, so in this case the FTB stamp duty relief is a larger proportion of the loan. In the end the issue could have been alternatively resolved by simply gifting the money instead of lending it. But that wasn't necessary.
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