To ask how to avoid 2nd home rate stamp duty

[Stampdutywoes]

Hear me out before you attack.

Currently living in rental property after splitting with ex partner. We own the home he is living in jointly.
The landlord of my rental wants to sell and I would like to buy it but the additional 5% stamp duty rate for what would count as a second home is a killer.
Are there any conveyancing solicitors who could advise on how to avoid (not evade) this extra 5%?

It's a second home
Have him cover half the extra stamp duty costs

Yes, it really is simple, even if I didn’t manage to express it clearly enough for you. Sorry.

in your case, you would have to dispose of the house your ex is living in and just have you as the owner for the second, to claim the extra tax back.

it is always a pain to pay more tax - I get that. We always want others to pay it, but not us. Human nature really.

If they did allow people to own two halves, think how many couples would split up, buy an extra house, then get back together again. I know you’re not in this category, but it would make a mockery of the idea of weighting tax on a second home.

You can avoid it by not owning two properties.

Everyone can avoid paying unnecessary tax

What if your ex meets &/or marries someone else - you could end up owning 50% of a house with them or even with their children.

Will your ex buy you out, pay you rent or is he just stealing it from you?

😂

(I hope!!😂)

It’s a complicated and unusual situation and I get what you’re saying that between you and your ex, you’d own two halves that equal one property each, so it’s very unfortunate that you’d be caught by the stamp duty surcharge when at the end of it you only own one property, so to speak.

If your ex can’t / won’t sell house 1 and give you a clean break financially, could there be another way to get a clean break (not a lawyer though, just an idea): could you divest your half of house 1 via part cash, part loan.

So in your example, you would transfer your half of house 1 to your ex, he would give you in return £400k cash and the rest as an interest free mortgage loan. So you would no longer own house 1, letting you buy house 2 without the stamp duty surcharge. And when your ex eventually sells house 1, you would get repaid the amount he owes you under the loan.

This would however mean you would have to come up with some kind of valuation on house 1 in order to size the loan but it sounds like you are on pretty good terms with your ex so you can probably reach an agreement you’re both happy with (you could get two or three valuations and take an average perhaps).

Let's hope not!!

But there isn’t a vehicle for reducing this tax liability.

No, it seems not. If there were then it would be perfectly ethical and legal to take advantage of it, just as many millions do with ISAs, premium bonds, trusts, dividends etc

But there isn’t so what you’re stamping your feet over is your inability to avoid tax which would make it evasion in the unlikely event of your getting away with it.

Thanks for your contribution Einstein 🤣🤣

Keep up dear, that was hours ago, not to mention tongue in cheek and you are still struggling with the difference between avoidance and evasion.

It’s you who’s struggling with it.

I’m a family lawyer so I can’t advise on tax but it does sound to me from your replies that he is manipulative and you may be vulnerable. He may not want to sell or get a mortgage or leave the home he loves but it’s not really his choice - half the asset is yours! If you don’t want to force it then there are financial consequences.

I’m staggered that you think owning a second property in this way is different to a couple owning a home they live in and then a holiday home. This also points to you being manipulated and vulnerable in some way.

Is there any way you could look into transferring your interest in the house to him and having a legal charge to secure your interest? That might be a practical option. He would still likely have to pay stamp duty on the half he’s receiving from you but it would be the ordinary rate, and you would then pay the ordinary rate for the house you purchase. You’ll have to pay CGT too I expect because you moved out so long ago. He could then have a charge secured against the house you purchase in the same way.

You’d need some proper tax advice from an accountant as well as proper estate planning advice because charges are enforceable and whilst you say you trust him, things can change and you don’t want to be dealing with an inheritance act claim in years to come.

I think it’s absolutely barmy to be considering keeping your financial ties when you’re separated and most people agree, but if that’s what you truly want you might be able to find a way around it, but obviously there will be costs for professional advice and taxes involved whichever way you look at it.

Good grief, I can’t reason with stupid.

Good thing you don’t have to then. What you’re calling avoidance is impossible because there’s no legal vehicle for it - you’ve admitted as much. Therefore what you want is illegal and evasion.

Thank you, I really appreciate your concern and advice and I do understand that it could sound like I am being manipulated from the details I have provided.
Neither of us want to sell our original home so that complicates things when I prefer my own space as well when I am not feeling well.

Then you have twohomes and have to pay. Because one of you is already a homeowner Simple

You are the one bleating on about it. I took the legal advice from other posters on board hours ago and stated that I would concentrate on negotiating a good price on the property to mitigate the higher stamp duty.

Yes, you are not the first to mention that!

No you need to pay the stamp duty unless you sell the initial home. I’d ensure that this cost was shared as only you have to pay it.

Could you explain to us why you don’t want it sold? It’s just an unusual stance to take if you’re not planning on moving back in.

Another option I thought of was you could both set up a limited company to purchase your house - I don’t know what the tax implications of a company buying a property are but the stamp duty might be less than paying the second home rate. I wouldn’t have thought there are many creative ways to avoid the extra stamp duty really though otherwise everyone would be doing it.

This sounds like you're trying to pay below market value so that you can escape the financial consequence of having two homes. I hope your landlord reads this thread and gives you notice.