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  • Tax

    Legal definition of property ownership

    Hello,

     Around 15 years ago, I bought a share in 2 properties with a family relative. My stake in the properties was small, but significant to me. One of the properties has a small mortgage in my name, the other doesn't. Over the past 15 years, the properties have been used by family members, sat empty or been rented out for short periods of time.

     I want to sell the properties, but my relative doesn't, which makes life awkward. My wife and I are looking to buy our first house together and I realize I'm liable for an increase in stamp duty.

    1. If you own a % of a property, are you still liable for the full increase in stamp duty of a second home?
    2. What constitutes second home ownership? Appearing on the deeds?
    3. What's the best way to sell a property when one party doesn't want to sell?

    Thanks

    Pete

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    Beneficial ownership is what counts rather than who is on the deeds.

    Your share in the other properties will invoke the extra 3% SDLT unless the value of the share in each is worth less than £40K in which case they would be ignored.
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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    OK, are there any tax avoidance measures that could be used such as signing the property over to my parents?

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    If you dispose of your beneficial interest in both properties you should be ok. There are other considerations to doing this of course, especially as you are on the mortgage for one.

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA


    Debbief,

     Can you elaborate a little on how I'd go about this and what the considerations would be?

    Thanks

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    You could do it via a declaration of trust if your mortgage terms do not prohibit it. There may be SDLT if the mortgage % passing from you was more than £40k total but that sounds unlikely? Would also trigger CGT but for such a small share this would likely be within the annual exemption.

    Your Solicitor can prepare the DOTs or you can do it yourself.

    Deb


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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA


    That is intresting but what if 6 people have equal shares in a property each worth less than 60K but two already already own a property.

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    Can you elaborate?

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    Beneficial ownership is an interesting topic

    To understand the state of the present law take a look a the three House of Lords’ decisions. 

    • Gissing v Gissing ([1971] AC 886)
    • Lloyds Bank v Rosset ([1991] 1 AC 107)
    • Stack v Dowden 2007

    Taken from The HM Land Registry:

    “The owner at law may not be the same person as the beneficial owner. A beneficial owner is a person entitled to the benefit of the land and on their death the equitable interest may not pass in the same way as the legal ownership does. The register does not guarantee that the proprietor is the beneficial owner and that they own the land for their benefit.”

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