The recent media coverage of the SDLT treatment of a house in the Clacton constituency brings different situations to mind.
Let us take a couple, A and B: they are not married, nor in a civil partnership. A has other property interests, B has none. A provides half of the money for a house bought in the name of B alone, with B providing the other half.
If the money provided by A is advanced to B as a gift or a loan, then B is the sole legal and beneficial owner and the SDLT liability of the purchase is assessed by reference to the circumstances of B. The circumstances of A are not relevant to whether the extra 5% SDLT applies to B’s purchase (FA 2003 Sch 4ZA para 2(2)). So long as B has no property interests relevant to the 5% surcharge, nor is deemed to have any (not even being the parent of a minor having an interest under a trust!) then the 5% surcharge should not apply to B’s purchase.
If, however, the money advanced by A is neither a gift nor a loan, then as a matter of law, regardless of the intention of the parties, a resulting trust springs into place (for example, see the House of Lords decision in Tinsley v Milligan [1993] 3 WLR 126). That means that B holds the legal interest on trust for A and B as tenants in common in equal shares. For SDLT purposes, A and B are now both purchasers and should be named as such on the land transaction return.
The question of whether the 5% surcharge applies has to be tested against A as well (FA 2003 Sch 4ZA para 2(3)), and if it is due, then the extra 5% SDLT applies to the whole price. As well as considering A’s other property interests, one would need to consider whether the ‘replacement of only or main residence rules’ apply to A, so as to switch off the 5% surcharge (FA 2003 Sch 4ZA para 3(6)).
As an aside, the position would be different if A were B’s father. In that case the anachronistic ‘presumption of advancement’ would apply, so A would be taken as having gifted the money to B and the resulting trust would not apply (Dyer v Dyer [1788] EWHC Exch J8). The ‘presumption of advancement’ rule is archaic, in that it would not usually apply if A was B’s mother! Section 199 of the Equality Act 2010 was passed to abolish the presumption, but has not yet been brought into force.
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SDLT and the funding of a purchase by a partner
The recent media coverage of the SDLT treatment of a house in the Clacton constituency brings different situations to mind.
Let us take a couple, A and B: they are not married, nor in a civil partnership. A has other property interests, B has none. A provides half of the money for a house bought in the name of B alone, with B providing the other half.
If the money provided by A is advanced to B as a gift or a loan, then B is the sole legal and beneficial owner and the SDLT liability of the purchase is assessed by reference to the circumstances of B. The circumstances of A are not relevant to whether the extra 5% SDLT applies to B’s purchase (FA 2003 Sch 4ZA para 2(2)). So long as B has no property interests relevant to the 5% surcharge, nor is deemed to have any (not even being the parent of a minor having an interest under a trust!) then the 5% surcharge should not apply to B’s purchase.
If, however, the money advanced by A is neither a gift nor a loan, then as a matter of law, regardless of the intention of the parties, a resulting trust springs into place (for example, see the House of Lords decision in Tinsley v Milligan [1993] 3 WLR 126). That means that B holds the legal interest on trust for A and B as tenants in common in equal shares. For SDLT purposes, A and B are now both purchasers and should be named as such on the land transaction return.
The question of whether the 5% surcharge applies has to be tested against A as well (FA 2003 Sch 4ZA para 2(3)), and if it is due, then the extra 5% SDLT applies to the whole price. As well as considering A’s other property interests, one would need to consider whether the ‘replacement of only or main residence rules’ apply to A, so as to switch off the 5% surcharge (FA 2003 Sch 4ZA para 3(6)).
As an aside, the position would be different if A were B’s father. In that case the anachronistic ‘presumption of advancement’ would apply, so A would be taken as having gifted the money to B and the resulting trust would not apply (Dyer v Dyer [1788] EWHC Exch J8). The ‘presumption of advancement’ rule is archaic, in that it would not usually apply if A was B’s mother! Section 199 of the Equality Act 2010 was passed to abolish the presumption, but has not yet been brought into force.
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