Stamp Duty Bombshell

[waterjungle]

Hopefully this is the right place to ask question but I suspect we are royally screwed.
We have just had our offer accepted on the house we want and AIP for our mortgage granted.
It is going to be just my husbands name I the mortgage. I have a flat that I bought before we were married that is rented out and has never been lived in by me.
Husband never owned a property before and us a first time buyer.
We have always lived in rented.
We were told he would get relief on Stamp Duty as a first time buyer. Our solicitor has come back today and said actually NO. He will be charged £18,000 as it is seen as a second home.
Like most people, we don't have a spare 18,000. This means we will loose the house we have offered on.
The flat I own is in negative equity so I can't sell.
Opinions on just how buggered we are?

Doubtful a limited company would help you get round it, pretty sure they are automatically liable to pay the higher rates anyway.

Job done, no fraud

Of course its fraud and your proposal was that the OP deliberately tried to mislead the solicitor.

Surely just sell the other flat? The negative equity loss must be less than the increase in stamp duty.

@waterjungle We only got told about this last week too. We're not married yet but it looks like our completion has been pushed to after we will be. Fiancé owns the flat so I don't get my first time buyer discount, despite house only being in my name.

There's no way round it, I have a limited company but we've been told that loophole was closed a while ago.

No help really, but you're not alone in not knowing!

rzasoshp we won't have enough time to sell the flat and complete (that's to say if we even find a buyer) before losing the house we have offered on.

I'm guessing the flat would have to be out of my name before completion on the house. They want completion in January my flat isn't even on the market.

One thing that may have been missed is that if it is replacing your main home but you have yet to sell it there is currently a 36m deadline to sell the other property to reclaim the additional stamp duty surcharge. The solicitors that have stated the additional charge is due are correct

This isn’t a bombshell

It’s about being married.

“ People (even married couples...) are individuals for tax purposes, surely”

Nope. Not according to my definition anyway. All the pension letters when my dad died....it’s a whole adjustment tax wise.

Happened to us but luckily our house was really cheap so it didn’t come to nearly as much as yours.

I’ve no idea how the solicitors missed it, and tbh, the online calculator is pretty clear too

We were stung with it too, had to pay £65k stamp duty in recent house sale 😱

Actually, you could sell the flat to yourself held within a ltd company, ok the flat would attract the additional stamp duty, but the main residence would not

You might be able to incorporate your flat into a Ltd company, pay stamp duty on that transfer. Your primary residence can then be at the lower stamp. Will possibly mean a different mortgage and still means you're likely to lose the house you want though with the timing of it all.

But if you put it into a limited company you have to think about the taxation on disposal. Plus you need to incur the costs of running a limited company (accounts etc). Just stop trying to outwit the system that everyone else has to comply with and either pay the bloody tax properly due or don't buy the house.

MN perplexes me sometimes.

Do you rail against companies who try to use artificial means to try and avoid tax? Do you think they should be able to manipulate paperwork to save money others have to pay?

Just wondering, because that's what the two of you were trying to do with your artificial structuring of the purchase of your joint family home. Pretending it was a sole purchase when it wasn't.

I'm glad the system works well enough to prevent you gaming it the way you were trying.

The substance of what you were doing was that it was always a joint purchase. Or were you planning to live somewhere else and just leave your husband alone in his solely owned family home?

I'm sorry you've had this disappointment but at least now you can do things properly. And honestly.

That's one of the reasons I didn't get married - we were both homeowners. Now both homes are sold and we live in one house together, my name is on the deeds. Luckily we both trust each other and he has no problem living in a house which is in my name - bought using his money.

I know it doesn't help, you can't go back in time and not get married - but for anyone else who's thinking of getting hitched it's not all roses and cheaper living.

So @AnchorDownDeepBreath, there is a way out. You can just not get married. It doesn't mean that you love each other any less, in my experience, you might love them more. And you'll save the ridiculous sums it costs to get married.

Now you don't have to be gay to have a civil partnership as of a week or two ago! Not sure how that effects things?

There is a lot of confusion here, mainly because of the rules which are incredibly complex. Basically the First Time Buyer exemption looks at the buyer only and does not take account of their partner's position. However the FTB exemption is not available if the 3% surcharge applies, and the surcharge rules do take into account of your partner's position. So here, because you own a property, your spouse would be subject to the surcharge and consequently you are not eligible for the FTB exemption. If you had lived in the flat, you can claim exemption from the surcharge under the Replacement of Main Residence rules, and would then be eligible for the FTB exemption. If the flat (or your interest therein) is worth under 40k, the surcharge doesn't apply and so the FTB exemption will be available.

"If you had lived in the flat, you can claim exemption from the surcharge under the Replacement of Main Residence rules"

Only if (a) they had both lived in it and (b) they sell it.

That's one of the reasons I didn't get married - we were both homeowners.

Neither of you were entitled to first time buyer's exemption from stamp duty regardless of whether you were married then? So marriage would make no difference to you.

Now both homes are sold and we live in one house together, my name is on the deeds. Luckily we both trust each other and he has no problem living in a house which is in my name - bought using his money.

But there is no tax advantage to doing this? You haven't saved SDLT (as you weren't a FTB). And you won't save on any other taxes either.

As you have both sold your houses, you would never have had to pay the uplifted SDLT for second homes. So I'm totally confused as to why your partner would make himself so financially vulnerable for seemingly no reason at all.

Now you don't have to be gay to have a civil partnership as of a week or two ago! Not sure how that effects things?

It doesn't. The whole point of civil partnership is that it is legally the same as marriage.

Yes, I agree - but we would've been liable for fees based on having two homes between us. Not FTB relief, of course. It would have cost us more if we'd been married - well that's what our solicitor told me!

Thanks for clearing that up about civil partnerships, I think it's going to be a very important step when it comes to taking legal responsibility for health issues.

We experienced this but the house is cheap enough (just) to pay stamp duty - and hope to claim back within 3 the years.

However we /I was living in the house before bought new one .. from what I've posted said that may not be applicable op if you've never lived in it (?)

I know a couple who bought in husband's name only and just didn't tell solicitor that wife already owned a house. They apparently got away without paying 2nd home stamp duty.

There is a risk in your DH owning your home in only his name though - people think it's ok because you'd get share in divorce but they could theoretically remortgage, sell etc without your knowledge or permission because neither the lender not land registry had you on their records. (Perhaps you could do the register interest thing in it but not sure how that works). So if your DH didn't turn out to be quite so reliable, committed, decent etc. It sounds like a risk.

Solicitor told me couples in.lo din were actually getting divorced and remarried due to this.

"from what another poster posted

*couples in London

DH father actually married us (he is a retired vicar) and it was all a bit shambolic. Maybe there is hope. Knowing him he left out a key bit and we haven't really been married for the past 8 years. I think I may have found the elusive answer we've been looking for 😂
I think the best hope we have is trying to find another mortgage that reduces the deposit for lengthens the term. That's the only way we are going to find another 18,000.
18,000 is about 16% of the value of money flat. It's not like I am some wealthy property magnate!
We have found a solicitor who says there may be a way around it but he isn't sure there is enough time to do it. He will tell us in a phone consultation for the princely sum of £800 +VAT - but there is no guarantee it isn't something like put it in a LTD company - which won't work!