Question on SDLT liability

  • Filter
  • Time
  • Show
Clear All
new posts

    Question on SDLT liability


    I am looking at releasing a 50% share of my residential property.
    Its currently classed as my prime residence. But I want to get some cash out of it, clear borrowing, and run it as a joint venture BTL.
    Would the in-coming investor be liable for sdlt?
    Its not a huge issue if they are, it just affects the yield proposal.
    I'm just wondering how their investment would be considered for sdlt purposes?
    Are they considered to be buying and they are liable?
    Or would it be an investment and there's simply a legal arrangement that 50% of the rental and 50% of future sale proceeds are distributed to the investor?
    Or could it be considered only as an exchange now? I may sell other 50% in 1-2y - so a delayed completion when sdlt would be liable??

    To confuse issues a bit further - I created a small annexe out of the original plot.
    2 new leases have been legally created/ prepared for Land Reg - the annexe on one lease and the main property on another lease.
    The idea was to sell the main property and to move into the annexe - ownership will remain in my name, just on the revised lease.
    This idea has now been amended to not sell the main property and instead to relinquish 50% on this investor/BTL proposal.
    I am just not sure of whether releasing 50% will be considered a purchase for his sdlt purposes or not??
    I do still intend to live in the annexe. Although I may rent that out too...

    I do have a loan that needs clearing.
    I may still juggle my finances and take out a BTL mortgage on (my share of) the main property.

    Aside from all this juggling - would I be liable for cgt?

    Grateful for fine tuning advice on this... Many thanks

    Selling half of the property is a sale and comprises a CGT and SDLT "event".
    So, depending on the value, they'll be due.

    The incoming purchaser is a buyer, same as any other buyer.

    You'll struggle to get lending on a jointly owned property (I'd say conventional BTL lending would be impossible).

    You would have to look at how the properties have been "split". From the sound of it, the freehold is as it was, and you have two leases that you intend to register (one for each property).
    Whats the incoming investor buying, part of the freehold or one or some of the leases?
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


      Yes - FH remaining under both new leases, each new one to be registered.
      Incoming investor will have 50% share of one new lease.
      The intention is short-term rental and then sell.
      So if investor pays SDLT for a share now and we then sell the whole property in 1-2y, hmrc gets 50% of the SDLT twice?
      Hmm. That doesn't seem fair/ correct?

      So would it be better to have an agreement to sell to the investor and the 50% is considered exchange, with a long delayed completion. Then we sell/ complete the whole property to a different 3rd party who pays all the SDLT at that point? And between now and that completion the property is rented?

      Is there anything improper in that course of action?

      Reading post #2 - is there a different way round an investor coming in? So it's not actually considered a purchase for the purposes of SDLT?
      Just thinking - if the investment partially cleared an existing loan, as if it was an assignment of the debt and the investor had a legal charge over that debt - would that be feasible instead of the investment being called a 'purchase' ?
      I would still need to have a loan - but it would be re-assigning the rest of current debt to a new BTL loan, simultaneously as the investor invested. Or it's all academic and however I try to work this, it will always be classed as a "purchase"??


        Post #2 also mentions cgt liability.
        The property has been prime residence for a long while. And I only intend to rent short term. Isn't there an exempt period for CGT? Like the last 18 months of your ownership?

        I intend to movie into the annexe which was under same ownership and lease for a long while - it will be just a case of shrinking the old lease rather than a brand new lease - if that makes sense. The part of which I intend to have an investor involved, rent and then sell will be a brand new lease. If I sold within the time period allowed by hmrc to sell old property and moving into new property, would I be exempt from CGT?
        Just trying to get my head round all the implications of what I would like' to do.


          If the incoming investor is buying 50% share of property then he will pay SDLT on the purchase, no way round that legally unless the investor is happy to not have his interests registered.


            Originally posted by HP mum View Post
            Reading post #2 - is there a different way round an investor coming in? So it's not actually considered a purchase for the purposes of SDLT?
            To avoid ADLT you would need to have no purchase.
            So the investment could be a loan or some other transaction not associated with the property.
            Or a trust of some kind.

            But the risks are that you are creating a mechanism for the sole purpose of not paying some tax.
            HMRC doesn't like that and most loopholes have been closed over time.
            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


              1. What does the annexe include ? a separate leasehold ( 999 years and no ground rent ) studio flat with bathroom ?

              2. When you sell a half share of property to another party , you may not get 50% of the market value - may be getting only 45% of price . You would be better off getting a 50% mortgage loan and keeping the entire property under your OWN name until you sell out completely. Why do you want to rent out for 2 years before selling because a no-deal brexit may hurt every property owner. ? .

              3. If you do find someone to buy first 50% of the property, then when you come to sell the other 50% interest, you will have to sell cheap to existing partner because there is no market for half share except at dirt cheap price.


                At the moment there is just one lease; one FH.

                An annexe has been created internally (bed/bath/living+ parking - like a flat above garage). I simply need to change the access point so the annexe has independent access.

                Lawyers created 2 new leases, each with small Ground Rent payable, for the purposes of selling one part/Title - neither registered yet; just prepared.

                But with the sales market slow - I have reconsidered to rent one or both parts out. (After a bit of light refub on the annexe).

                The Title could remain as one lease - apart from the annexe needs a postal address for anyone to live in it (as til now it was part of the larger plot). Can I get a new postal address without registering Title at Land Registry?

                And if I find an investor, it may be a bit messy with % share if the Title remains on the original lease. The idea was to offer % share on one part only; the annexe part remains 100% in my name. But perhaps lawyers can resolve simply with a legal agreement on the % and to what it relates??

                The issue I have is that I wanted to get money out via a sale. That hasn't happened. So I am looking at alternatives. I won't get a loan on my own, but will with investment as the ltv improves.

                I understand its confusing. Its a good idea; just hard to action in reality...


                  Update on this query:
                  I finally have a buyer :-) which negates any kind of other investment juggling and concerns about sdlt or cgt... Thank heavens.
                  Although it is not a simple sale and is raising other questions on how to structure the exchange/ completion process.... which I am raising elsewhere on the forums.
                  Why can't life be less complicated?!


                  Latest Activity


                  • Will I pay stamp duty?
                    So i was hoping for some good advice.

                    Me and my girlfriend are looking to buy a house together, the problem is i already have a house of my own which i am renting out on a BTL mortgage. So if i buy a house with my girlfriend that will be my second home, but her only home.

                    18-05-2019, 16:02 PM
                  • Reply to Will I pay stamp duty?
                    There are a minority of lenders who will accept one person being on the Title but with two persons on the mortgage in order support the affordability , otherwise You cannot circumvent the SDLT premium in the second property is in joint names.
                    18-05-2019, 21:34 PM
                  • Tax implications of extending a lease at no cost
                    Hi there

                    i am one of four directors of a company that owns the freehold of the four flats in our house.

                    one of the owners is selling and wants to extend the lease as its dropped to 67 years. I realise now we should have done 999 leases as soon as we bought the freehold but...
                    14-05-2019, 10:12 AM
                  • Reply to Tax implications of extending a lease at no cost
                    Thanks - it would be our preference to renew them all at the same but unfortunately the seller is pushing us as their buyer is threatening to pull out.

                    We now have differing advice over whether we will be liable to pay tax on the assumed financial benefit of the extended lease at no cost....
                    17-05-2019, 16:27 PM
                  • Capital gains tax and tax credits
                    hi i have recently sold a rental property and have been working out my tax liability for the GCT which works out at 2,500 tax to pay and im a non tax payer and this just takes me over the threshold - ok for tax credits pruposed do i need to declare the captial gain as its a capital gain and not income...
                    17-05-2019, 14:29 PM
                  • Reply to Capital gains tax and tax credits
                    update - ive been onto the tax credits for the past hour and they are saying not to inclue unless im re-investing or making money from the capital gains
                    17-05-2019, 16:16 PM
                  • Is this legal?
                    Hi all, I am completely new to this so wanted to get some informal advice. I currently jointly own a freehold property in London (with my sister that lives in the US) that I inherited from my mother many years ago. I do not live in the house, not does my sister; until now, the entire property was let...
                    15-05-2019, 22:04 PM
                  • Reply to Is this legal?
                    It's permitted, but is obviously designed to evade tax. You need to declare the income you receive from your son - and pay tax on it. What is he going to pay over to you - the full rent or more than he has actually received? For £1500 this is a lot of complications and your son becomes a landlord with...
                    17-05-2019, 09:56 AM
                  • Reply to Is this legal?
                    Your son is basically renting the property from you, so he can deduct the rent he pays you from his income, so you don’t end up paying tax twice.
                    17-05-2019, 07:21 AM
                  • Reply to Tax implications of extending a lease at no cost
                    If the freehold title is owned by external party, then the external "freeholder" would charge each leaseholder for lease extension.

                    If the freehold company is owned by the 4 leaseholders, the members of the freehold company can agree to extend all flats together to 999...
                    17-05-2019, 05:49 AM