Deed of Trust and LBTT (Stamp Duty)

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    Deed of Trust and LBTT (Stamp Duty)

    I was wondering if you could help me answer a few questions. I am planning to buy a flat in Edinburgh to live in (and rent my current flat out), and I was exploring the possibility of adding my girlfriend to the mortgage for this Edinburgh flat. She owns half a flat in Edinburgh. Technically, this would both count as our second property, so we'd have to pay the extra 3% LBTT stamp duty.

    Because she only just bought half a flat in Edinburgh in the last few months, I would be financing everything for this purchase, aswell as paying the mortgage. My intent is to buy a flat in Edinburgh to live in and do up, then sell in 6 months to a year. Then, at that point, I can buy a more expensive flat in Edinburgh with my girlfriend where I don't need to pay the extra 3% stamp duty (because I'd be replacing my main residence). She'd then contribute to the mortgage.

    Here are some questions I have regarding this idea:

    - I was told by First Mortgage that a solicitor could draw up a "deed of trust" protecting my deposit, if things should go sour and me and my girlfriend were to break up. Since I would be paying the mortgage in its entirety, is there a way where all the proceeds from the flat would go to me, in the unfortunate event where we were to break up? Also, if I were to die unexpectedly, is it possible to cover myself for this eventuality?

    - If I were to buy this Edinburgh flat, and sell it within 6 months, would this still be able to count as my main residence? I know there are some rules with "main residences". My current flat would be put on a buy to let and my new flat would be a live in mortgage.

    - If I sold within 6 months, would I have to pay the enhanced stamp duty again? I'm not sure if there is a rule where you have to live in the property for a set period of time before buying a new main residence in order to avoid the enhanced LBTT?

    - Also, there is the issue with my girlfriends flat. She bought it with a friend 50/50. It's not possible to change her flat to a Buy to Let because her friend still lives there (as a live in owner) and intends to do so for the foreseeable future. What happens in this instance? Can she just keep it empty if she wanted to? Or, does she have to have somebody stay in her room? Because it is only half a flat (which is relatively inexpensive), it wouldn't cost too much to keep empty in the meantime.

    I appreciate that this area is a bit of a minefield, but any light you can shed on this would be very helpful.

    Thanks!

    #2
    You should consult the experts in Scotland as the rules are different.

    Comment


      #3
      The experts don't seem to reply...or know what exactly are the rules with regards to this LBTT issue. It's very frustrating!

      Comment


        #4
        Here are some questions I have regarding this idea:

        - I was told by First Mortgage that a solicitor could draw up a "deed of trust" protecting my deposit, if things should go sour and me and my girlfriend were to break up. Since I would be paying the mortgage in its entirety, is there a way where all the proceeds from the flat would go to me, in the unfortunate event where we were to break up? Also, if I were to die unexpectedly, is it possible to cover myself for this eventuality? I am by no means an expert but would suspect that this is correct. I would repost this question on the tax thread and am sure you will get a better answer.

        - If I were to buy this Edinburgh flat, and sell it within 6 months, would this still be able to count as my main residence? I know there are some rules with "main residences". My current flat would be put on a buy to let and my new flat would be a live in mortgage. You should write to HMRC and elect that this property be your main residence. The test of whether it is your main residence is based on quality of time at the property rather than length. In this scenario you would meet the requirements but I would keep Council Tax and utility bills as evidence in case it was ever questioned.

        - If I sold within 6 months, would I have to pay the enhanced stamp duty again? I'm not sure if there is a rule where you have to live in the property for a set period of time before buying a new main residence in order to avoid the enhanced LBTT? Please find attached a link with the rules https://www.revenue.scot/land-buildi...ional-dwelli-5 My own interpretation is that you have two properties at the start and two properties at the end of the transaction so wouldn't have to pay but again I am by no means an expert on this subject.

        - Also, there is the issue with my girlfriends flat. She bought it with a friend 50/50. It's not possible to change her flat to a Buy to Let because her friend still lives there (as a live in owner) and intends to do so for the foreseeable future. What happens in this instance? Can she just keep it empty if she wanted to? Or, does she have to have somebody stay in her room? Because it is only half a flat (which is relatively inexpensive), it wouldn't cost too much to keep empty in the meantime. I would imagine this will be governed by the mortgage lendors conditions which will change from lender to lender.

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