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Joshua, Lawyer
Category: Law
Satisfied Customers: 27129
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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Can i put my first home into ltd company to avoid stamp duty

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can i put my first home into ltd company to avoid stamp duty on second
JA: What steps have you taken so far? Have you prepared or filed any paperwork?
Customer: ..
JA: Have you talked to a lawyer about this?
Customer: no
JA: Anything else you want the lawyer to know before I connect you?
Customer: no
Customer: replied 5 months ago.
I bought my first flat a year ago. Me and my boyfriend want to buy together. I want to keep and rent out my flat and not sell it. He has not bought before. He doesn't want to miss out on his first-time buyer privileges including help to buy isa, and no stamp duty fees. If we buy together I understand that not only will we both have to pay stamp duty, I will have to pay extra stamp duty for owning two homes. Is there ways around this e.g. if he buys the property alone and then adds my name to it later? Or if I start a ltd company and move my first property to be owned by the ltd would the new home count as a second home or my only home?

Hello and thank you for your question. I will be very pleased to assist you. I'm a practising lawyer in England with over 15 years experience.

  1. May I ask roughly what would the purchase price be for the new property and would you be getting a mortgage to assist with the purchase?
  2. If so roughly what amount of mortgage would you need?
  3. What percentage shares did you have in mind for each of you to own in the property?
  4. Would you be contributing any capital to the purchase?
Customer: replied 5 months ago.
HiWe'd be looking at most likely 10% deposit and 90% mortgage. In our area, we'd be looking at 250,000 but maybe a bit more 300,000. so based on that 225k - 270k mortgage. He would be able to get this alone or we could get this together affordability wise.Ideally, we'd like to be 50/50 with a shared purchase but are open to adjusting this if it makes financial sense to do so i.e. avoiding stamp duty taxWe'd ideally be contributing half of the deposit each so if the deposit is 25k then 12.5k each.

your proposal to transfer your existing property to a limited company would enable you to buy a property without the second home surcharge but it would not benefit you financially because stamp duty is payable upon the transfer of the property from you into a limited company and limited companies pay 3% surcharge on such acquisitions or 15% if the property in question is worth more than £500,000. This would negate most if not all of the benefit you are seeking to achieve.

The only way you can avoid second homes surcharge would be for your partner to buy the property on his own.

Some people will, after the purchase completes, enter into a declaration of trust as between themselves to record that one of them owns the property on behalf of both in defined shares and such agreements are legally enforceable, however strictly speaking whilst these agreements do not have to be centrally registered - in deed there is nowhere to centrally register them - they do need to be declared to HMRC as to not to do so would technically amount to tax evasion and SDLT would be assessed on the amount of mortgage debt you assume rather than the purchase price but this is a second SDLT bill and it would be subject to the second home surcharge so it will not necessarily produce a saving. I am aware that some people enter into such agreements and then fail to declare them to HMRC on the basis they do not consider it likely that the arrangement can be discovered, which is probably true unless the relationship breaks down and one party decides to report the issue, but it is not something that could be recommended as it does technically amount to tax evasion.

The second home SDLT surcharge has been made very difficult to legally avoid exept in some very limited circumstances using life interest trusts and the like which would not be suitable in your circumstances. I'm sorry this is not likely to be the answer you were hoping for but I hope it as least helpful in setting out the relevant issues.

Does the above answer all your questions? If it does, I should be very grateful if you would kindly take a moment to rate my service by selecting the 5 stars at the top of the screen before you leave JA today. Your feedback is important to me. If there is anything else I can help with please reply back to me though

Customer: replied 5 months ago.
Thanks for the advice. Would your answer change based on the fact that my first home was only 125,000 to buy a year ago? Would I still have to pay stamp duty if I moved my existing property to an LTD to avoid the surcharge on the second personal property?
Customer: replied 5 months ago.
I also saw on the hmrc website that stamp duty doesn't apply when a share in a property is "Gifted" to someone, how does this work? how would it be considered a "gift"?

Re your first query - even though the property was £125K and therefore under the SDLT allowance, the allowance does not apply to limited companies. The company would acquire the property and pay SDLT on its value regardless that it is not paying for the property at a rate of 3%. If there is a mortgage on the property you would also have to remortgage to (more expensive) commercial finance as residential mortgages will not lend to limited companies. In addition, you would have solicitors costs and incorporation and accountancy fees to maintain your company. The costs of all this are likely to exceed any benefit of avoiding second home SDLT surcharge on second home unfortunately.

Re gifts - it is perfectly true to say that SDLT does not apply to gifts. However the second home surcharge does. So where you receive a gift of part of a property (this is essentially what is going on in my example of a declaration of trust above after purchase) whilst no SDLT is payable on the gift value, the second home surcharge is so you would still be liable for the surcharge on the amount gifted.

Does the above answer all your questions or is there anything I can clarify or help you with any further?

Customer: replied 5 months ago.
If I buy a second property am I able to do that with 10% deposit, does it have to be 25% I think I heard that somewhere?

If you were buying a second property on your own, most lenders require a 25% deposit. However the position will be different if you buy with your partner because his status and employment income will also be taken into account and so the deposit requirement is likely to be relaxed. You can speak to a mortgage broker who will be able to give you a detailed comparison table for available products that best fit your requirements and circumstances as the mortgage market is in continuos flux as new products come on to the market and older ones removed.

Has the above answered your questions satisfactorily?

Customer: replied 5 months ago.
Am I able to get advice for property outside of the UK or is this sites advice limited to the uk?
Customer: replied 5 months ago.
am I able to keep this conversation open as I know we're bound to have more questions that I cannot think of right now? thanks

The site does maintain specialists in certain other jurisdictions - Spain, France, USA, Canada are four that I am aware of. This section is limited to UK law but you can post a question in one of the other legal sections if there is one that suits which will be picked up by a foreign lawyer.

If you have no further questions for now I should be very grateful if you would kindly take a moment to click a rating to rate my service by selecting the 5 stars at the top of the screen before you leave JA today. I am very grateful to receive any feedback. The question will save to your account and you are welcome to return to ask any follow up question on the same issue without further charge.

Joshua and 4 other Law Specialists are ready to help you
Customer: replied 5 months ago.
OK thanks I'll give that a go :)

Many thanks