The Lemon Fool

Background: we (myself and two siblings) have recently been orphaned. As is so often the case, we inherit one asset worth anything: the house.

Normally we'd just expect to sell the place. But today's market with rising interest rates and falling prices looks less than favourable, and letting it for a few years (with an agent to manage it) might possibly make financial sense. Though we'd need to spend a few grand tarting the place up first!

So to my questions:

1. If we keep it and let it, we each become part-owner of a second property. Would that make any of us who move house in the UK liable to the multi-homeowner surcharge on stamp duty?

2. If so, can that be mitigated by owning it at arms length? Most obviously by setting up a company to own the house?

UncleEbenezer wrote:Background: we (myself and two siblings) have recently been orphaned. As is so often the case, we inherit one asset worth anything: the house.

Normally we'd just expect to sell the place. But today's market with rising interest rates and falling prices looks less than favourable, and letting it for a few years (with an agent to manage it) might possibly make financial sense. Though we'd need to spend a few grand tarting the place up first!

So to my questions:

1. If we keep it and let it, we each become part-owner of a second property. Would that make any of us who move house in the UK liable to the multi-homeowner surcharge on stamp duty?

2. If so, can that be mitigated by owning it at arms length? Most obviously by setting up a company to own the house?

Firstly, I think the answer to both questions is "yes".

Secondly, never take legal advice from a plumber.

UncleEbenezer wrote:1. If we keep it and let it, we each become part-owner of a second property. Would that make any of us who move house in the UK liable to the multi-homeowner surcharge on stamp duty?

2. If so, can that be mitigated by owning it at arms length? Most obviously by setting up a company to own the house?

Yes to (1).

Re (2) I recall a discussion here about something like this before. One idea mooted was for the party who may buy another property to not be on the title of the inherited property. But to instead have their one third interest in that property represented by a Declaration of Trust:

viewtopic.php?f=49&t=34795&p=509358&hilit=SDLT#p509358

Lootman wrote:

UncleEbenezer wrote:1. If we keep it and let it, we each become part-owner of a second property. Would that make any of us who move house in the UK liable to the multi-homeowner surcharge on stamp duty?

2. If so, can that be mitigated by owning it at arms length? Most obviously by setting up a company to own the house?

Yes to (1).

Re (2) I recall a discussion here about something like this before. One idea mooted was for the party who may buy another property to not be on the title of the inherited property. But to instead have their one third interest in that property represented by a Declaration of Trust:

viewtopic.php?f=49&t=34795&p=509358&hilit=SDLT#p509358

And tangentially, the buyer of my family home in Reading (when we sold it in 2016) set up a Ltd Co to actually own it.

I don't think you do have to pay the higher SDLT if you sell your main home and buy a new main home to live in. The full details are at https://www.gov.uk/guidance/stamp-duty-land-tax-buying-an-additional-residential-property but if the transaction is about your main residence, that is exempt.

Plus, it mentions that the rules are to apply to the beneficiaries of a trust, and not trustees of the trust, so I am not sure how setting up a trust would help.

Loup321 wrote:I don't think you do have to pay the higher SDLT if you sell your main home and buy a new main home to live in. The full details are at https://www.gov.uk/guidance/stamp-duty-land-tax-buying-an-additional-residential-property but if the transaction is about your main residence, that is exempt.

Plus, it mentions that the rules are to apply to the beneficiaries of a trust, and not trustees of the trust, so I am not sure how setting up a trust would help.

Thanks for that. The "main residence" bit (which is what matters) seems much clearer than I had expected! And looks like a potential loophole for chancers of the kind unmasked in the MPs expenses scandal.

I would read the trust bit differently to you, as it appears to apply to who pays the stamp duty when buying a house as a trust. That kind of difference of interpretation seems like a reason to treat my own expectation - or the advice of a plumber (I loved the way Mike expressed his reply) - with a pinch of salt.

Thanks too to Mike and Lootman for your replies.