Can the 3% surcharge apply where an individual has an interest under a declaration of trust?
3% Additional Rate, Bare Trust, Dwelling, Joint Purchasers
“A couple are purchasing a property in the UK. One of the purchasers has a property in another EU country. The property abroad is worth over £40,000.00 and is held in 50% by the buyer. The other 50% is owned by the parents. The client is not paid any rent from the property. The parents would not be able to buy out the purchaser and the purchaser does not want to remove the parents from their family home. The other purchaser is replacing the main residence.
The purchasers wanted to do the following transaction. Purchase the property in the sole name of the buyer that is replacing the main residence. The mortgage would be in both names. There would be a restriction on the title so that the sole proprietor would not be able to sell without the consent of the other. Declaration of Trust would be entered into between the buyers. Please could you let me know if this could be done legally without the higher SDLT having to be paid or if the higher SDLT would be payable.
I thought I would just clarify that the client with the property abroad is permanently living in the UK and is renting a flat.”
Source: BLG Member
As the second buyer already has a major interest in a dwelling (and will not be replacing his only or main residence) the 3% surcharge will be payable if he acquires a ‘major interest’ in the UK property. The declaration of trust would give him such an interest. It seems to me that the purchase will, in reality, be in joint names as evidenced by the declaration of trust and so the 3% surcharge will apply to the whole transaction.
At the time of publication this response was correct however as tax legislation and practice change from time-to-time you should take specific advice before taking any action.
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