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Stamp duty relief is property-sensitive

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First-time buyer relief for SDLT was reintroduced at the end of 2017. At best, it is curious that in certain circumstances the availability of the relief should depend on the type of property purchased. At worst, the legislation is defective and needs to be corrected urgently.
One of the ways parents can help their adult children get on the housing ladder where they do not have enough cash to give or lend their children is a purchase in the joint names of the parents and child. It means that the bank can consider the parents’ income as well as the child’s income when applying affordability tests. The parents would go on the title as a co-owner of the property, possibly holding a nominal share only.
The down-side to this arrangement is SDLT: the involvement of the parents might engage the higher rates and deny first-time buyer relief for the child.
Consequently, the parents might decide that the property should be held on trust solely for their child. That way the only beneficial owner of the property is the child. Tax usually tracks beneficial rather than legal ownership, so one would reasonably expect this arrangement to work. 
An SDLT deeming rule applies where a person acquires a new lease as a bare trustee or nominee for another. It deems him to acquire the whole interest in the property.
It means that where the child buys a new-build apartment from a developer, the parents are taken to be a purchaser even if the child will be the sole beneficial owner and, assuming the parents will not be living in the property, first-time buyer relief is denied.
But if the same arrangement is used to enable the child to buy a house or the same apartment second-hand, only the child would be taken to be the purchaser and first-time buyer relief would be available. This is because the deeming rule does not apply to freehold transfers or leasehold assignments.
The difference in tax treatment is indefensible in my view. It cannot possibly have been Parliament’s intention to deny first-time buyers relief simply because they choose to buy a new-build apartment. The reality is that Parliament failed to disapply the deeming rule, as they did for the higher rates.
The author thanks John Shallcross (Blake Morgan) and Marc Selby (Laytons) for originally raising this issue. 


Issue: 1429
Categories: In brief , SDLT , SDLT