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  • Tax

    First time buyer SDLT relief and BTL ... ?

    Hi i am about to get my first perporty - a small flat so I could get the stamp duty relief. I will pay in cash with inherited money. It is not feasible for me to move in there immmerdiately, so if I rent it out are HMRC going to ask me to give the tax exempted back?

    Or is there a time period. i.e. after how long can I rent it out, without give the tax exempted back?

    I have posted this in the tax tribe but don't think I am very clear with the answer so post it again

    Many thanks for the contributors there and thanks a lot on advance here

    thanks

    (*Moderator note:  This thread was amended after posting by the original poster, then removed and posted back into the tribe where it was originally posted, even though the moderator had moved it to the correct tribe (Tax). This might account for some of the anomalies in the replies to the original question*).

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    I am not sure on the SDLT question. Though ibthinknif its yourbfurst property you dont have to pay the levy. I'd be more concerned about your mortgage agreement, if you have one.

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    If you are planning to purchase the flat with a residential mortgage, and then rent it out to tenants, you will be in breach of your mortgage terms.

    I am sure you would also be in breach of the terms of the stamp duty relief, and the government will come for this money should they find out you are renting your property.

    Be very careful if this is your train of thought, as repercussions could be severe.


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    From the Guidance Notes:

    There may be cases where an individual first time buyer intends to continue to reside at another dwelling following the purchase of a dwelling, for example the individual maintains a home that they rent from someone else and intends to continue to do so indefinitely. In such cases, all of the facts and circumstances of the case should be considered to determine whether the individual intends the purchased dwelling to be their main residence. It is not necessary that the purchaser must occupy the property immediately following purchase. At the effective date of the transaction, there must be a clear intention to occupy the dwelling as the purchaser’s only or main residence and the fact that circumstances make it either impossible or impractical to immediately occupy the dwelling do not prevent relief being due.

    https://assets.publishing.service.gov.uk...e_note.pdf

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    are someone going to sue me or ask me to give back the stamp duty waived?

    The "someone" are HMRC (Her Majesty's Revenue and Customs) and they have far-reaching and strong powers.

    They will certainly be charging you retrospectively for stamp duty, should they find out what you have done.  Therefore, if you go down this road, understand the risk you are taking.  I feel personally that it is morally wrong to "game" the system.  The stamp duty waiver is to help first time buyers into homes by reducing the costs of getting on the property ladder, not to make it easier for you to profit from an investment.

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    Interesting question which could apply to me and my son. Thinking of buying a house in my sons name. Don't think he'll move out for quote a while but thinking would be a good investmen for him in the future. Reading the comments it probally would not be possible for him to rent it out without paying stamp duty. Paying tax on the rental income would of course be payed.

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    Have a read of the link I attached above and this one for the Rent A Room scheme.

    https://www.gov.uk/hmrc-internal-manuals...al/pim4000

    It is possible for your son to qualify for the FTB SDLT allowance and the RAR exemption. I believe he would have to reside there for at least one day.

    I am not qualified in any way and would strongly recommend taking qualified advice if you choose to do this.

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    Thanks gary that has crossed my mind and something I will consider. I already have a flat I rent out myself. Have a fair bit in the stocks and shares and just inherited some money. Trying to work out how bestway to invest it.  If it's possible to invest it in my sons name think that may be a good option.

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    Be careful is all i would say.

    Had a tax investigation last year.. I did everything above board but they discovered i did not declare interest on my natwest current account all 12.60... Que 4 letters back and forth with hmrc.

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    Yes mateI want to do everything above board. Not sure where I stand in buying the house in my sons name. I heard somewhere if I die within 7 years it would be classed as mine for tax reasons.

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    Brian, how will you son finance the purchase? Cash from you presumably. If it’s a loan to him then the loan is an asset in your IHT estate. If it’s a gift then it’s a PET and you have 7 years to live to avoid IHT. If it’s a gift with loan type strings attached then it will forever be in your estate as a GWR.

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022