any relief from second property SDLT here ?

seems unfair but...

Didn't find your answer?

Client bought property for her parents in 1999. Oral trust at the time that beneficial ownership vested in them for the rest of their lives that has subsequently been ratified by written declaration of trust. So client is legal but parent beneficial owner. Client has always rented property as her PPR and now wishes to purchase her own PPR but keeping the parents property. The guidence seems clear that exemption only applies if the second property is replacing your PPR that seems unfair unless I'm missing something.

Anyone agree the easy way around it would be to gift the parents property into trust prior to buying her PPR ? Discretionery would fit the bill with no hold over needed as PPR of the beneficial owner.

Otherwise any ideas ? Only thing I can think of is whether the new second property ownership rules apply to legal rather than beneficial owner ?

Any views would be appreciated.

 

Replies (15)

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Portia profile image
By Portia Nina Levin
18th Oct 2016 13:57

FA 2003, Sch. 16 and the new Sch. 4ZA, paras. 10-13 are what you need.

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By Mr_awol
18th Oct 2016 13:59

I don't know if you're missing something but I clearly am - specifically, I'm failing to see why you think it's unfair. That is, of course, unless you generally feel that the levy on second homes is unfair.

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Replying to Mr_awol:
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By pembo
18th Oct 2016 14:12

Pretty obvious I would have thought.Unfair in the context of equitable doctrine i.e. she's chosen to rent her PPR and move to a bought one. If she'd owned her PPR and moved then relief would apply. So why should she be penalised for what in reality is exactly the same scenario ?

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Replying to pembo:
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By Mr_awol
18th Oct 2016 15:14

She isn't being penalised.

She has a house - effectively a 'rental' (albeit at nil rent). She wants to buy another one, so will have two houses.

The legislation is designed to charge additional duty on second houses. Not second homes that are first homes if you ignore one as long as you are doing your parents (and yourself, usually) a favour.

There is an exemption which kicks in if you sell your PPR. She doesn't own a PPR as she is renting a home. The exemption effectively, in my opinion, prevents you being 'trapped' in your existing PPR just because you happen to already have a BTL. She doesn't need that exemption as she is free to move to another rental property.

If anything, it is unfair that some people get around the second home tax by virtue of the above. That doesn't make it unfair when others fail to get off.

She could always move in with her parents for a few months whilst she saves up enough to pay the additional stamp duty.

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Replying to Mr_awol:
Portia profile image
By Portia Nina Levin
18th Oct 2016 15:23

But you're wrong. The parents have an interest in possession, and so under para. 10 they are deemed to be the owner of the property for the purposes of the higher rate SDLT charge.

That means the daughter does not currently have any properties for that purpose.

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Replying to Portia Nina Levin:
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By Mr_awol
18th Oct 2016 15:31

Yes. As already mentioned, later on (got to love this ridiculous new website) it does appear that she will not, sadly, be charged the tax on this occasion.

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Portia profile image
By Portia Nina Levin
18th Oct 2016 14:51

But the daughter is not the owner of the parent's property for SDLT purposes by virtue of Sch. 16 para. 1(1) and Sch. 4ZA, para. 10.

So there is no problem.

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Replying to Portia Nina Levin:
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By Mr_awol
18th Oct 2016 15:30

Then she definitely isn't being penalised, unfortunately

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Replying to Mr_awol:
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By pembo
19th Oct 2016 10:33

Jeez Awol get over it !! "Unfortunately" ???? Why should anyone who happens to invest in property rather than stock/shares/commodities etc be targeted ? This is cynical politics at work here rather than logic !

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Replying to pembo:
Stepurhan
By stepurhan
19th Oct 2016 11:26

pembo wrote:

Jeez Awol get over it !! "Unfortunately" ???? Why should anyone who happens to invest in property rather than stock/shares/commodities etc be targeted ? This is cynical politics at work here rather than logic !

The big difference is that, unlike stock/shares/commodities, everyone needs somewhere to live.

People who own more than one home reduce the supply for those just looking for a place to live. Basic economic theory says that reduced supply will generally lead to increased prices for same.

So, unlike the other investments you mention, the intention of the penalty could be considered to be to limit the price increases on a necessity. Are you really saying that's an unreasonable thing for a government to do?

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Replying to stepurhan:
paddle steamer
By DJKL
19th Oct 2016 11:53

Only insofar as the second property is used as a second property and left empty most of the time, when used as an investment property it does not reduce the number of properties available merely the mix of available tenures.

I no longer have a vested interest in residential letting as we are pretty much out of that market (we sold virtually all our flats) and now only retain the commercial portfolio, however I would point out that market stability (knowing what the idiots will do next) is more conducive to long term investment which might help the supply problem.(building flats for short term lease)

The 60 flats we recently sold we also originally built (in the 1990s), what incentive now to build to rent when each week the rules change?

The sort of builds we did involved a five year commitment from acquiring the sites, the planning process to finished flats; to commit the necessary funds these days, within an uncertain marketplace, is quite a leap of faith.

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Replying to stepurhan:
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By pembo
19th Oct 2016 13:45

Point well made stepurhan but I still think mainly targeting private landlords is unfair. Maybe people who have a second e.g.holiday home is fair game but the reality is that (1) many people simply do not want to own their home and (2) for many of those that do it is already unaffordable unless mum and dad step in.
The issue is the inbuilt culture in this country of owning where you live that you generally do not see in other European countries. We are obsessed with it in this country. Every other TV show is about it. This does not apply to institutional or larger corporate landlords who own the vast majority of rented property so how does this square with making more affordable homes available for first time buyers ? Just another soft target who can't kick back through the lobby system.

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Replying to pembo:
Stepurhan
By stepurhan
19th Oct 2016 14:29

pembo wrote:

Point well made stepurhan but I still think mainly targeting private landlords is unfair.


Nothing further to add. Just wanted to say thank you for the considered and polite response. It's always nice to debate like civilised gentlemen wherever possible.
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Replying to stepurhan:
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By pembo
19th Oct 2016 15:33

You're most welcome and I reciprocate !

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By MBK
19th Oct 2016 13:00

Thank heavens for PNL!!

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