Stamp Duty on second property workaround?

Hi David

You will be pleased to hear that your suggestion is possible at least in theory.

The first thing to check will be whether your sister can get a mortgage. I believe there are some lenders who will provide mortgages to Armed Forces personnel on this basis. The type of mortgage would be "regulated Buy-to-Let" on the basis that you sister might want to live in the property at some stage. I suggest you look into this first, otherwise the SDLT planning part of your question becomes irrelevant if she can't finance the property in her own name. I suggest you have a discussion with a very broker friend of mine called Mark Edwards. He has an enquiry form on his member profile - see >>> https://www.property118.com/member/?id=3042

Assuming the mortgage is available in the name of your sister only then YES, Stamp Duty would be charged at the normal rate without the 3% second property loading to your sister. To secure your own interests in the property you could ask your solicitor to draft a Declaration of Trust to recognise your percentage of ownership and register a caution with HM Land Registry on that basis. If the property is rented you would each have to account for your own percentage of ownership.

Good luck

Regards

Mark
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David, I would like to clarify a phrase that you mentioned, "works with the Armed Forces". Do you mean that she is in the Armed Forces, or does she work for a civilian company that assists the Armed Forces? Both categories can live in Armed Forces accommodation abroad.

If she is the latter, she may be treated as an ExPat, in which case the situation is not so good as being in the forces and serving overseas. Mark is quite correct in that many lenders look favourably upon Armed Services personnel who are serving the country abroad, but this doesn't always extend to people in ancillary support roles.

A very good point Mark regarding the Declaration of Trust - I've never heard of it.

Whilst David trusts his sister completely, circumstances do change eg marriage which could put his investment in danger without proper protection.

Out of interest David how much would you be putting in to the property?

Reply to the comment left by "Mark Alexander" at "21/10/2016 - 08:31":

Mark, John, Adrian,

Firstly many many thanks for your responses. I will attempt to answer your points but at present this idea is in its infancy so I do not have a particular property in mind.

Mark, in terms of mortgage we would be looking to buy outright most likely so the mortgage 'issues' should go away. We would probably be looking at around the £80 -120K sort of price range to achieve this.

John my sister is a teacher for forces schools. In this respect I believe she is employed solely by 'the forces' as opposed to some contracted company, so the 'favourable' outlook that lenders would have would seem likely to hold if we did want to look at going down the mortgage route.

Adrain, point taken about declaration of trust. As always in these situations you never know what may happen in the future.

It is the declaration of trust and the solicitors contract Mark mentions that raises the most uncertainty with me.

"To secure your own interests in the property you could ask your solicitor to draft a Declaration of Trust to recognise your percentage of ownership and register a caution with HM Land Registry on that basis."

If I was to do this aren't we essentially saying the property is jointly owned and then by doing this am I not then entering into owning a second property with the stamp duty 'problem' I am trying to avoid.

Hi David

No, not at all.

The declaration of trust is entered into "after" the purchase is completed. It merely recognises your contribution to and stake in the property. The legal owner would continue to be your sister.

No requirement for a mortgage definitely simplifies matters too.
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Reply to the comment left by "David Forrest" at "21/10/2016 - 10:38":

Hi David,

The reason I asked how much you would be putting in to the property was to consider whether it was worth trying to get round stamp duty given other risks.

You mention a figure of £80k to £120k, so how much would you contribute?

Something else occurred to me, I presume you would be receiving a proportion of the rental income, is there a possibility that not paying stamp duty could be construed as tax evasion?

I'm glad you raised this David because it has got me thinking whether I could purchase a property in my grandson's name using the Declaration of Trust Mark suggested.

Great question David!
The responses given to you by our colleagues are all valid so grab them with both hands however, why don't you simply the situation for yourself - I like simple things? I.e. go on the straight and narrow, buy the property in your name or in the name of a Ltd company own by you and negotiate a 3% or more cashback (in addition to any other discount) with the vendor to pay the tax. Yes, you'll still pay the tax but it won't come out of your pocket directly. Consider it as your charitable contribution to UK PLC and HMRC. That's what I would do.

Reply to the comment left by "andy adewale" at "21/10/2016 - 17:36":

I would negotiate the maximum possible discount and look to minimise tax as well. That's called being a good businessman isn't it?
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Reply to the comment left by "David Forrest" at "21/10/2016 - 10:38":

How are you getting on David?