Minimising/avoiding SDLT When Purchasing More Shares In A Shared Ownership Property

My girlfriend currently owns a 35% share of a property which we have been living in for the past 3 years, I am not currently on the mortgage. We are looking to purchase the rest of the property and take out a joint mortgage. I also own another property which I rent out. My question is, will we be liable for the higher rate of SDLT and if so are there any ways to avoid paying the higher rate. The option for my girlfriend purchasing the rest of the shares by herself is not an option due to her just becoming self employed and not earning enough money to pass an affordability test and she is also relying on me to provide more money for the deposit.

3 Answers

If your girlfriend bought the remaining 75% on her own she would have to pay stamp duty if the remaining share was over the current stamp duty threshold.

If you are intending to buy it with her then the higher rate will apply as you own another property. Stamp Duty avoidance is illegal and no firm should be advising you on how to avoid paying it.

So even though this is now my main MAIN residence and has been for almost three years i would still be liable to paying the higher rate? What about if i was to come onto the existing mortgage of £55k for 35% i would then be liable for £27.5k and own 17.5%, this woild then be below the SDLT threshold of £40k. Could we then purchase future shares without paying the higher rate? I have always been told by my accountant that the avoidance/minimising of paying tax whilst keeping in the boudaries of the law was legal, I am under no illusion that the evasion of paying any form of tax is completely illegal.

You are quite right to say that whilst tax evasion is an offence, tax avoidance is not. There are two things for you to consider. First, is your existing property worth £40,000 or more? I'll assume it is but if it isn't then you are fine. Next, what will you actually paying for the interest you acquire in your partner's property? Remember that for the purpose of calculating stamp duty liability it is the chargeable consideration that is relevant, I.e. the actual amount paid. The real value is not relevant. For example if I sell you a £1,000,000 house for £1,000 then you don't pay any duty. If however I sell you strip of land worth £1,000 for a million, you pay duty on a million.

Calculating the "purchase price" on a transfer of equity can be tricky. If the additional share s were not being purchased then it would be simple. The purchase price would be half the outstanding mortgage debt plus any money you paid to your partner. Half the existing debt is because you would either become jointly responsible for the existing mortgage or you would take out a new mortgage and pay off half the existing debt. So if that were the case then based on an outstanding debt of £55000 no duty would be payable because rhe consideration paid by you would be £27500, unless you paid your partner money on top. Here though you then have another transaction, the purchase of the shares. Will the purchase price be less than £80,000? If yes then fine, your half is under £40,000. If it's more then how to structure the deal so that your share of the purchase price is less than £40,000? It is important to understand, and it is something many people don't, that when assessing whether a transaction is a higher rate transaction and their is more than one purchaser you need to look at each purchaser individually. So it doesn't matter if your partner pays more than £40,000 because she doesn't own another property. Thinking about it, I really need to know 1) the price that will need to be paid for the additional shares and 2) the amount you'll need to borrow to purchase the additional shares. Can you let me have these figures?