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  • FIRST POST
    • guyjamelin
    • By guyjamelin 13th May 18, 10:36 PM
    • 4Posts
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    guyjamelin
    Shared ownership flat: Stamp duty on back-to-back staircasing
    • #1
    • 13th May 18, 10:36 PM
    Shared ownership flat: Stamp duty on back-to-back staircasing 13th May 18 at 10:36 PM
    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.
Page 1
    • the_quick
    • By the_quick 14th May 18, 9:12 AM
    • 58 Posts
    • 30 Thanks
    the_quick
    • #2
    • 14th May 18, 9:12 AM
    • #2
    • 14th May 18, 9:12 AM
    Not actually answering the question, but you can just sell your share. I did.No problem at all.
    • guyjamelin
    • By guyjamelin 14th May 18, 10:17 AM
    • 4 Posts
    • 0 Thanks
    guyjamelin
    • #3
    • 14th May 18, 10:17 AM
    • #3
    • 14th May 18, 10:17 AM
    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.

    Cheers
    • mije1983
    • By mije1983 14th May 18, 1:52 PM
    • 2,974 Posts
    • 18,824 Thanks
    mije1983
    • #4
    • 14th May 18, 1:52 PM
    • #4
    • 14th May 18, 1:52 PM
    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%.

    • guyjamelin
    • By guyjamelin 14th May 18, 2:06 PM
    • 4 Posts
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    guyjamelin
    • #5
    • 14th May 18, 2:06 PM
    • #5
    • 14th May 18, 2:06 PM
    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.
    • Tom99
    • By Tom99 14th May 18, 2:13 PM
    • 2,063 Posts
    • 1,388 Thanks
    Tom99
    • #6
    • 14th May 18, 2:13 PM
    • #6
    • 14th May 18, 2:13 PM
    I think you need to research Sub Sale relief:

    https://www.gov.uk/government/publications/stamp-duty-land-tax-sdlt-pre-completion-transactions-rules

    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
    • NineDeuce
    • By NineDeuce 14th May 18, 4:52 PM
    • 824 Posts
    • 753 Thanks
    NineDeuce
    • #7
    • 14th May 18, 4:52 PM
    • #7
    • 14th May 18, 4:52 PM
    You dont pay stamp duty on selling.....
    • guyjamelin
    • By guyjamelin 14th May 18, 5:16 PM
    • 4 Posts
    • 0 Thanks
    guyjamelin
    • #8
    • 14th May 18, 5:16 PM
    • #8
    • 14th May 18, 5:16 PM
    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.
    • SDLT Geek
    • By SDLT Geek 14th May 18, 10:03 PM
    • 235 Posts
    • 145 Thanks
    SDLT Geek
    • #9
    • 14th May 18, 10:03 PM
    • #9
    • 14th May 18, 10:03 PM
    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.
    • NineDeuce
    • By NineDeuce 15th May 18, 2:37 PM
    • 824 Posts
    • 753 Thanks
    NineDeuce
    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.
    Originally posted by guyjamelin
    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.
    • Tom99
    • By Tom99 15th May 18, 2:56 PM
    • 2,063 Posts
    • 1,388 Thanks
    Tom99
    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.
    Originally posted by SDLT Geek
    Would subsale relief might be available if the transaction is set up correctly?

    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.

    The subject matter being bought/sold on is the same ie 55% share.
    Last edited by Tom99; 15-05-2018 at 3:16 PM.
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