So my sons and I are considering making a property investment. Of the three of us, one already owns a property and the other two do not. There is extra stamp duty payable if you buy a second or subsequent home, and it applies to the entire value of the property even if some of the buyers do not already own.
In this case there is considerable flexibility in how title can be held, and how the funds are held and used. How can our purchase be structured so that legally no extra stamp duty is due? Expressing the issue in generic terms:
Suppose A, B and C want to buy a property. A and B own no other property, but C does.
An obvious idea is that only A and B hold title to the property, and at some suitable later time they "gift" a one third share to C. Stamp duty is not payable on gifts as I understand it.
Another idea is that C stays off the title but there is a side agreement or contract that equalises out the cashflows and returns from the investment.
Any ideas that won't get anyone into trouble?
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Stamp Duty work around
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- Lemon Half
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Re: Stamp Duty work around
Lootman wrote:So my sons and I are considering making a property investment. Of the three of us, one already owns a property and the other two do not. There is extra stamp duty payable if you buy a second or subsequent home, and it applies to the entire value of the property even if some of the buyers do not already own.
In this case there is considerable flexibility in how title can be held, and how the funds are held and used. How can our purchase be structured so that legally no extra stamp duty is due? Expressing the issue in generic terms:
Suppose A, B and C want to buy a property. A and B own no other property, but C does.
An obvious idea is that only A and B hold title to the property, and at some suitable later time they "gift" a one third share to C. Stamp duty is not payable on gifts as I understand it.
Another idea is that C stays off the title but there is a side agreement or contract that equalises out the cashflows and returns from the investment.
Any ideas that won't get anyone into trouble?
Don't buy in a personal capacity, but via a corporation of which you own shares (which also has the flexibility of how many of each shares are owned and the ability to buy/sell the shares and not the underlying asset)?
No doubt this introduces an alternative set of "Taxes (Practical)" considerations.
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- Lemon Half
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Re: Stamp Duty work around
Dealtn's suggestion merits further investigation.
Look into :
possible relative capital gains treatment v corporation tax
Mileage allowances to visit your "business" if you decide to rent it out
If you rent...can you take "income" in the form of dividends ( tax implications)
If you or A and B decide to buy further properties, you already have the business structure in place ( and avoid 2 lots of stamp)
If you borrow money as a business (mortgage), is it possible to offset mortgage charges as a business cost?
How would you transfer a percentage of a holding between A,B or C (method, cost, ease).
I'm no expert in this but I'm throwing around some ideas that you might with to check.
Look into :
possible relative capital gains treatment v corporation tax
Mileage allowances to visit your "business" if you decide to rent it out
If you rent...can you take "income" in the form of dividends ( tax implications)
If you or A and B decide to buy further properties, you already have the business structure in place ( and avoid 2 lots of stamp)
If you borrow money as a business (mortgage), is it possible to offset mortgage charges as a business cost?
How would you transfer a percentage of a holding between A,B or C (method, cost, ease).
I'm no expert in this but I'm throwing around some ideas that you might with to check.
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- Lemon Half
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Re: Stamp Duty work around
I googled "buying property as a company"
Lots of interesting stuff! Random selection of links from the search.
https://bestgapp.co.uk/news/buying-prop ... me-london/
https://www.parachutelaw.co.uk/news/pro ... ed-company
https://www.pricebailey.co.uk/business- ... -property/
Lots of interesting stuff! Random selection of links from the search.
https://bestgapp.co.uk/news/buying-prop ... me-london/
https://www.parachutelaw.co.uk/news/pro ... ed-company
https://www.pricebailey.co.uk/business- ... -property/
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- Lemon Slice
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Re: Stamp Duty work around
If you are all cash buyers:
A and B buy with their cash
A and B take out a shared appreciation mortgage with C.
A and B own the property
C has a first charge on the property.
C's charge gets released when the property is sold (C gets their money back with their share of the appreciation)
Possible downsides:
If it's not an arm's length deal, HMRC could ignore the arrangement anyway.
C could end up with the appreciation component getting taxed as interest.
A and B buy with their cash
A and B take out a shared appreciation mortgage with C.
A and B own the property
C has a first charge on the property.
C's charge gets released when the property is sold (C gets their money back with their share of the appreciation)
Possible downsides:
If it's not an arm's length deal, HMRC could ignore the arrangement anyway.
C could end up with the appreciation component getting taxed as interest.
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- Lemon Quarter
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Re: Stamp Duty work around
Lootman wrote:Suppose A, B and C want to buy a property. A and B own no other property, but C does.
An obvious idea is that only A and B hold title to the property, and at some suitable later time they "gift" a one third share to C. Stamp duty is not payable on gifts as I understand it.
Another idea is that C stays off the title but there is a side agreement or contract that equalises out the cashflows and returns from the investment.
Any ideas that won't get anyone into trouble?
There should be no SDLT payable in this situation, as it's not payable on gifts (unless the gift also involves release from a mortgage).
However, CGT may be payable, as a disposal of a share in property by way of a gift is treated as sale of the share at market value.
There's no need for C to become a joint owner of the legal title - his interest can be adequately protected by a Declaration of Trust. This has the additional potential benefit that anyone looking at the Land Registry title will see no reference to C, and his interest in the property can therefore be kept secret.
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Re: Stamp Duty work around
AsleepInYorkshire wrote:Try researching qnups
May be worth considering?
AiY(D)
I appreciate the various suggestions around pension products and corporations. But CK really nailed the answer for me on the grounds of simplicity.
I simply want a way of legally "hiding" an owner from the title to avoid stamp duty anomalies, and his solution seems elegant, effective and simple.
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