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Avoiding increased SDLT / indirect mortgage

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I live in a block of flats which are currently difficult/impossible to sell due to issues with the external cladding. On our community facebook group one member mentioned that they are planning to buy a second property and move there. I assume they plan to let the first property for now.

They asked whether anybody has had a similar situation and have they been able to get around the increased SDLT on the second property. Another group member said that they are also in the process of buying a second property, and to avoid the increased SDLT they plan to put only one name on the title deeds and use an 'indirect mortgage'. They say that it is 'a bit of a faff' but are working with a tax adviser, solicitor & broker.

I mostly work in personal tax compliance (income tax and CGT) but am interested in whether this would actually work. The only way I could see it possible working is if they are an unmarried couple and only one of them owns the first property. If that is the case I would be worried about what would happen should the relationship have problems or one of the couple dies.

Has anybody seen this before? I'd be interested in any thoughts.

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By Justin Bryant
24th Jun 2020 09:19

Perhaps as a silver lining (or cladding in this case) you can argue the existing flat interest is thereby worth less than £40k, so you are outwith the SDLT surcharge.

The faff solution works in principle, but they must not be married/joint buyers as you say.

Perhaps instead they can gift the flat under a DoT to a relative etc.

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Replying to Justin Bryant:
By IslingtonAccountant
25th Jun 2020 22:12

Thanks Justin, I thought some kind of trust might be involved!

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