First-time buyers of new-build apartments being stamped on

Posted on 28th January 2019
First-time buyers getting on the property ladder with the help of the ‘Bank of Mum and Dad’ might be unfairly discriminated against due to a loophole in the Government’s stamp duty relief.

Leading law firms Blake Morgan and Laytons, as well as professional services giant KPMG, are calling on the Government to amend the legislation and honour their pledge to first-time buyers.

In the 2017 Autumn Budget, the Chancellor, Rt Hon Philip Hammond MP, announced a stamp duty land tax relief for first-time buyers.  However, an apparent omission in the small-print of the legislation means this relief is, in fact, not available to everyone making that first step onto the property ladder.

Some buyers who seek additional financial support – usually from parents – and purchase using a joint mortgage requiring one or more signatories to be named on the title deeds of the property, are not currently eligible for stamp duty relief.

This is because the legislation fails to include an exception to a rule that appears elsewhere in stamp duty legislation. A popular means for parents to provide support for their children is to accept liability on a joint mortgage and to set up a trust whereby a property is held in the name of the parent and first-time buyer, but only for the latter party’s benefit – in what is called a bare trust.

However, under the current rules, the trustees of a bare trust are taken as a purchaser of the property for stamp duty purposes when the property bought is a new build and completion is by the grant of a new lease, so there’s no stamp duty relief.

John Shallcross, Associate at Blake Morgan said: “This apparent oversight is particularly unfair.  For so many people the dream of owning their first home is dependent on some form of financial support from parents.  The failure to include an exception to a technical rule means that in certain circumstances the stamp duty relief is denied simply due to the type of property purchased.  In most cases, the ‘offending’ housing type is a new build apartment – exactly the type of property a first-time buyer in a large conurbation would purchase.”

Blake Morgan, along with Laytons and KPMG, are in dialogue with HM Treasury suggesting that they table a small change to the legislation so that the relief could work as intended.

Marc Selby, Partner at Laytons adds: “The only ‘real’ purchaser in these situations is the first-time buyer.  Bare trusts mean the parents do not acquire a beneficial interest in the property, so they shouldn’t be deemed to be a purchaser as is currently the case for a new lease.”

Sean Randall, Associate Partner, KPMG comments: “There is no discernible policy reason for denying the relief in these circumstances and we don’t believe Parliament set out to omit the exception. The legislation appears to treat differently a first-time buyer in this situation who is taking a new lease from one in an otherwise identical position who buys a freehold or takes the assignment of an existing lease.  As a result, this small change could win over first time-buyers and save a lot of potential heartache in the process for people wanting to own their first home supported by the Bank of Mum and Dad.”

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