3% higher rates & beneficial ownership

Newlyweds are purchasing their first home together and are concerned that the higher rates of SDLT will apply to their purchase.

Newlyweds Debbie and Dom are purchasing their first home together and are concerned that the higher rates of SDLT will apply to their purchase. The couple have been advised to purchase the new first home in Debbie’s name only, in order to mitigate the exposure to higher rates.

Debbie has always lived with her parents as Dom works in London and rents an apartment there. Dom and his brother, Mark, are the legal owners of a rental property. Dom was listed as legal owner solely to help Mark secure the initial mortgage and derives no benefit from the property.

Considerations:

• Married couples (and civil partners) are treated as a single person for these purposes. Therefore, if the higher rate would be applied to Dom, it will equally apply to Debbie.
• There are no similar ‘let-outs’ for rental properties as with the ATED provisions.
• It is important to remember the distinction between legal and beneficial ownership. Where an individual has absolutely no beneficial interest in the other dwelling, they will not be considered to own an interest for the purposes of determining if the higher rates apply. This should be evidenced in writing.

Accordingly, if it can be demonstrated that Dom has no beneficial interest in the rental property held by him and his brother, the higher rates will not be applied on the purchase of Debbie and Dom’s first home. A declaration of bare trust should be sufficient to demonstrate the absence of beneficial ownership. There is no need for the property to be acquired in Debbie’s name only.

If you have any queries around SDLT please do not hesitate to get in contact via our SDLT Advisory Service.

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