SDLT and first time buyers

[mpppen]

Hello again.

Just wondering if someone can advise.

If I sell a BTL to my children who do not own their own property, I understand that they'll get the stamp duty relief.... two questions then.

If they're buying the £350,000 jointly, does the relief count for both of them separately (i.e. they can both claim it) or is the relief purely against the property as a whole. I assume it's per property not per purchaser.

Also, if they then decide they want to rent out that property, how long do they need to leave it before doing so as the relief only applies if it's their main residence.


Hope I've explained that clearly and thank you for any advice.

[DoricPixie]

The relief is against the whole property purchase.

Your children will only get the relief if they are FTB intending to occupy the property as their main residence. It is the intention that counts so if the intention is to pretend it's their main residence for a period of time because the real intent is to let the property the FTB SDLT relief would not apply.

[AndrewDod]

Capital gains tax?
Who assessed market value?
Are they actually paying for this?

[mpppen]

Thanks both.

The intent is for them to live there but they may want to rent it out while they go off to university. That's where I'm struggling as to whether the Stamp Duty relief applies or not.

CGT wouldn't apply as the property hasn't increased in value significantly since our purchase as couple of years ago and we have the agent's assessed market value.

They would be paying for it with a private mortgage.

[AndrewDod]

Thanks both.

The intent is for them to live there but they may want to rent it out while they go off to university. That's where I'm struggling as to whether the Stamp Duty relief applies or not.

CGT wouldn't apply as the property hasn't increased in value significantly since our purchase as couple of years ago and we have the agent's assessed market value.

They would be paying for it with a private mortgage.

A few other comments:

Depending where you are HMRC is not going to believe "no increase in value over past two years". An estate agent assessment may not be worth much at all. If challenged and HMRC do their own assessment you may be paying tax on a 20% uplift of 350K = quite a lot of tax.

Are these students really getting a £180K mortgage each and passing you £350K in hard cash (in part via the mortgage provider giving that cash to you)? If it is partly a gift that changes the Stamp duty position and also the inheritance tax position.

For your SDLT question the key words are "A first time buyer is defined as an individual or individualS" -- they are one first time buyer not two (with one limit)

[mpppen]

Thanks.

Yes, the lender is happy to lend them 100% the purchase price so not gifting on our side. In essence, it's just removing it from our name into theirs as he is also our lender.

It's unusual I appreciate but it's a private commercial lender - if that makes sense. His company has funds it lends to people. I've asked him and he's happy to us to sell the property, get his money back and then officially lend 100% of purchase price to the kids to buy the same property. He'll discharge his charge against and create a new one for them.

Appreciate the CGT issue and if that's the case then we'll just pay it as needed.

[AndrewDod]

Apart from anything else, if you are selling the property to the kids, you are getting cash and they have a 100% mortgage - and then they are not actually paying a mortgage on 100% of 350K you will be paying it -- it is not a classic GROB, but risks falling foul of GROB rules - so when you die, even if 7 years have passed they may still have to pay inheritance tax.

I would be very careful here. I am not sure what advantage this highly elaborate arrangement has over an outright gift from you to them (which would involve no stamp duty (depending on your mortgage), no questions about GROB and no funny tricks.

[jpkeates]

If the buyers are going to rent the property while they go to university, it may meet the criteria for Stamp Duty Relief but it may not.
It would be unusual for siblings leaving university to be able to commit to cohabit in a particular place when they graduate.

There's obviously a lot more detail behind this than you may wish to discuss publically, but this sounds quite elaborate when it might be more prudent to simply wait a while.
If you're trying to pass on the property for IHT purposes, you might want to look at a different structure - possibly a company or trust.

While the "rules" of a private mortgage are often fairly flexible, it would be an unusual lender who would allow a residential mortgage to support a let of some years in lieu of the properties use as a residence.
The risk profile is quite different.

Letting a property isn't that simple, and it's not something I'd ever recommend for students (no offence to your children).

[DoricPixie]

How old are these children if they have yet to go to university?