mr

[george price]

8 years ago I gifted a small one bedroomed appartment to my daughter, partly to eliminate this asset from IHT and to help her gain her independence. She is now in a position to purchase a house with her fiance and start a familly, but finds that she is being priced out of the market by virtue of the fact that she currently lives in her flat and is being hit by a large stamp duty penalty of £18,000 above the normal stamp duty of £6,500.

She does not want to sell the flat, as it offers a modicum of financial security in her future years as her (as well as most peoples' nowadays) and her partner's estimated pension is estimated at hardly adequate. When she starts a familly, finances will of course get tighter.

Is there a method to avoid this crippling tax?

[Richlist]

1. The new prime minister has suggested that changes to the stamp duty land tax rules are needed to free up the housing market. So, she could wait and see what changes are made.......unlikely changes will be introduced until 2020.

2. She could form a Limited Company, make herself (& partner) directors. Sell the flat to the limited company. The company will then own the flat, she will own the company. I believe she would then not be liable for the additional 3% of SDLT on her new house purchase. Suggest talking to an accountant for advice.

Otherwise, I don't see any other ways of legitimately avoiding it.

[landlord insurance]

The diffence in stamp duty suggests your daughter is looking at a £430k property and you are comparing first time buyer stamp duty (£6.5k) and second home stamp duty (£24.4k). Is this right?

Basically your daughter can no longer get first time buyer stamp duty. Even if she sells her existing property, she would have to pay standard stamp duty (£11.5k based on figures above). Her fiance could go it alone but obviously that rules out your daughter's income on the mortgage and she would have no interest in the property. An £18k saving though (assuming fiance is a FTB).

Transferring flat to Ltd Co (as above) is an option but be aware that Stamp Duty would be payable on market value of the flat and at the higher rate. Stamp duty for the new purchase would then be £11.5k (at standard rate) saving £12.9k on the second home rate.

Above is only from what I have seen from investigating a similar issue with a friend, it may or may not be accurate but might point you in the right direction. I would suggest speaking with an accountant to help you before making any decisions.

[george price]

Thank you both for your help. You are correct that she is looking to purchase in the region of low to mid £400,000 whilst her flat is probably worth £230-£250 k.

I will investigate your idea with an accountant.

[landlord insurance]

Transferring a £250k property from daughter to Ltd Co would attract £10k stamp duty. New house purchase then attracts £11.5k stamp duty. So thats £21.5k total instead of £24.4k if everything left as it is. Still a saving but not as attactive as before, especially as you have to factor in the company set up costs and inherent administrative tasks and responsibilities of running a Ltd Co.

[george price]

It has been suggested that as we gifted my daughter the property, she may be able to gift it back to us, there of course wiould be no CGT, enabling her to avoid the penal stamp duty levy. Presumably thereafter, at a future date,  we could possibly gift it back to her.