HMRC SDLT: SDLTM29875 – Interaction with Shared ownership

Principles and Concepts of Shared Ownership Interaction

This section of the HMRC internal manual provides guidance on the interaction with shared ownership. It outlines the principles and concepts involved in shared ownership arrangements, focusing on tax implications and compliance requirements.

• Explains shared ownership and its relevance to tax regulations.
• Details the tax obligations for parties involved in shared ownership.
• Provides examples of shared ownership scenarios and their tax treatments.
• Highlights compliance requirements and reporting procedures.

Relief for Shared Ownership Leases

When you get a shared ownership lease, you can claim relief from Stamp Duty Land Tax (SDLT). This is available whether you choose to elect for market value or decide to pay SDLT in stages. The same rules apply if you create a shared ownership trust because relief can be claimed when you declare this trust.

What Happens When a Shared Ownership Lease or Trust is Assigned

If a shared ownership lease or trust is assigned to a new buyer, the SDLT rules for this assignment are treated the same way as a normal lease assignment. This means that the same rules that apply for first-time buyers will apply here. The amount paid for the assignment of the lease will also comply with these rules.

Understanding Shared Ownership

Shared ownership is a helpful scheme that allows individuals to buy a part of a property while renting the rest. It is designed for people who may not be able to afford to buy a home outright. Here are some key points to keep in mind:

• With shared ownership, you buy a share of a property, which can be anywhere from 25% to 75%, and pay rent on the remaining share.
• Over time, you can buy more shares in the property, a process known as ‘staircasing’.
• The initial purchase price often includes relief from SDLT, making it more affordable.

Claiming SDLT Relief

To claim SDLT relief for a shared ownership lease, you need to consider a few factors:

• If you make a market value election, you will be calculating SDLT based on the full market value of the property rather than just the share you buy.
• If you decide to pay SDLT in stages, you will pay based on the value of the share you purchase at the initial time, and then on future purchases as you staircase.

It’s essential to keep proper records of what you paid for each share and any rent paid, as this information will be vital for accurately completing your SDLT return.

Assigning a Shared Ownership Lease

When someone’s shared ownership lease is assigned, the person taking over the lease must deal with SDLT as they would if they were purchasing a standard lease. Here’s how that works:

• The value of the assignment will determine the SDLT payable, similar to other property transactions.
• First-time buyers may benefit from relief if they qualify under the standard rules.

For instance, if you’re a first-time buyer taking over a shared ownership lease for a share worth £180,000, you may not have to pay any SDLT because first-time buyer relief applies to properties valued under £425,000.

Important Considerations

There are several key considerations for shared ownership that buyers should be aware of:

• Eligibility: To qualify for a shared ownership lease, individuals usually need to meet specific criteria, such as income limits and first-time ownership status.
• Lease Conditions: Shared ownership leases can have particular conditions that might affect your rights over the property, including terms around purchasing additional shares.
• Rent Payments: Rent must be paid on the portion of the property that you do not own, and this can increase over time.
• Resale Conditions: If you later decide to sell, there may be restrictions or preferential options for the housing association or original seller.

Useful Information

For further information about SDLT and shared ownership, you can find general guidance on the UK government website. This resource provides detailed information on the eligibility, process, and tips for purchasing shared ownership properties. The page can be accessed at gov.uk/stamp-duty-land-tax/shared-ownership-property.

Final Points on Shared Ownership and SDLT

As with any property purchase, being informed and prepared is vital when claiming SDLT relief and navigating shared ownership. Ensure you are aware of all your rights and responsibilities under your lease or trust. This will help ensure you make the most of the relief available through shared ownership schemes, keeping your path to homeownership as smooth as possible.

Make sure to consult the specific HMRC guidance or a qualified professional if you have any particular questions or circumstances. Understanding how shared ownership works with SDLT can save you money and simplify the home-buying process.

For more detailed information about how SDLT interacts with shared ownership, you can refer to the page titled SDLTM29875 – Interaction with Shared Ownership.

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