Stamp Duty Land Tax.

[sg31]

My parents left their home to my sister and I. My nephew and his girlfriend wanted a house and property prices in Brighton were out of their price range so it was agreed that I would sell my 50% of the inherited property to nephew and girlfriend and as they obviously couldn't afford all of the property my sister would retain her 50% with a view to selling it to them at some stage in the future when they could afford it.

The ownership of the property was therefore, sister 50%, Nephew 25%, girlfriend 25%. There is a mortgage on the property of £67K, all 3 parties are on the mortgage at the mortgage companies insistence although it has been paid by my nephew and girlfriend only.

My sister owns her own home.

This was 3 years ago and as I expected might happen my nephew and girlfriend split up. Everything is very amicable and it was decided that my nephew would buy out his girlfriends share to give him 50% ownership, he would take over the mortgage payments.

It's messy and not ideal but this is what they have decided.

The conveyancer has told them that SDLT of £2940 is payable as my sister has her own property. They assess girlfriend is being paid £75650 plus one third of the outstanding mortgage of £67000 (£22350) total £98K @ 3% = £2940.

I know SDLT will be payable but is the above calculation correct in the circumstances set out above?

I'm not a big fan of conveyancers and would have advised them to use a proper solicitor if they had asked, unfortunately they only asked for my advice at this late stage.

[richlist]

I believe £98k is below the threshold that SDLT starts but if a property is already owned then the buyer has to pay 3% on top of any normal SDLT......hence the 3% charge.

As both your sister and nephew already part own property then on the figures you've supplied it sound correct.

I know it's a pain.....it's also a pain for anyone with a BTL who wants to move from their main home. Or anyone with property overseas who wants to move from their UK property. It can be a very expensive exercise.

[Clitheroekid]

I may be missing something, but it seems to me that there would be no SDLT payable in this situation.

The only person who appears to be acquiring anything is your nephew - your sister's position after the transfer of equity will remain the same as it is now.

Consequently, any SDLT would be assessed solely on the consideration `paid' by your nephew, and on the assumption that he doesn't own any other property the effective threshold for him would be £125k.

As the consideration is only £98k this is below the threshold, hence no SDLT payable.

[richlist]

I think what's complicating the situation for me is the mortgage.

If I understand it correctly the property is currently mortgaged with 3 names. The new mortgage will have 2 names. As the 2 names already own a share of the property and are now buying a larger share (as far as the lender is concerned) they are liable for 3% SDLT.

As this transaction is not part of an approved shared ownership scheme then presumably the rules associated with 'staircasing' do not apply ?

[sg31]

Thanks for the replies Clitheroekid and richlist.

How do I get a definitive answer to this question? Is there some authority I can phone or write to who tell my sister and nephew if they need to pay.

Is the lender the one who accounts to the revenue for the money or is it the conveyance?

[scrumpyjack]

Looking at Zoopla's explanation of the 3% SDLT
https://www.zoopla.co.uk/discover/buyin ... XefivWT.97

I can't see that the 3% is applicable. She is not buying an additional property but simply a larger share of the existing one so at the end of the day she ends up with only one property (not even that as she will still own only part of it). (See Zoopla's flowchart)

The mortgage isn't relevant in itself- what is relevant is the total consideration being paid. That comprises the cash being paid and the debt being assumed (ie how much of the mortgage liability is being taken over). The value for SSDLT purposes is the total of those. A mortgage is simply a loan secured on an asset, it gives the mortgage company no rights to the property except that the mortgagor can prevent the asset being sold until the debt is fully discharged. SDLT is nothing to do with the mortgagor.

[sg31]

Hi scrumpyjack, my sister already owns one property outright and mortgage free. She already owns 50% of the property now being discussed and will still have 50% after this transaction. My Nephew currently owns 25% of the property being discussed and will own 50% after the transaction. His partner (ex) currently owns 25% and will own NIL after the transaction.


The proposed charge is being made because of my sisters involvement but the point at issue is whether the charge is correct because her ownership does not change after the transaction. She isn't really involved it is my nephew buying out his ex's share of the property after they split up.

[richlist]

If the sister will be a joint mortgage holder with the nephew, won't the lender assume the mortgage is in equal shares ? Therefore both parties are borrowing to purchase an increased share of the property.

[Clitheroekid]

This is the official HMRC guidance - https://www.gov.uk/guidance/sdlt-transf ... r-property

Example 1 seems to be the closest to the situation here. As I said earlier, SDLT is assessed on the consideration being given by the buyer, and in this case it's below the £125k threshold.

I can't see the relevance of the sister owning other property, as it's not her that's acquiring an interest.

Is the lender the one who accounts to the revenue for the money or is it the conveyance?

It's the person acquiring the interest who is liable for payment of the SDLT, so a lender would never pay SDLT.

If the buyer is represented by a conveyancer the conveyancer would normally deal with payment of the SDLT on the client's behalf.

[richlist]

It looks like the posters situation is covered here:

www.gov.uk/guidance/stamp-duty-land-tax ... l-property

[sg31]

Thank you all for your assistance I'm sure my sister and nephew will be very grateful. It's very kind of you to take the time to look into this.

I will suggest they quote the relevant sections and hopefully that will resolve the matter. If there are any further problems I'll report here.

I keep telling everyone I talk to that they should find a good solicitor and use them, it's hard to get them to understand that correct advice is worth paying for.

[Clitheroekid]

The only certainty in this whole sorry fiasco is how ludicrously complicated and incomprehensible SDLT is in anything other than the simplest of transactions. It's yet another example of ill-planned and hastily executed legislation, resulting in huge numbers of anomalies that weren't taken into account in the drafting process. Many professionals can't understand the law, so how on earth is a lay person supposed to do so?

And the so called online guidance is pathetically inadequate.

It makes you wonder what this lot do to justify their existence - very little in my experience - https://www.gov.uk/government/organisat ... lification

[gryffron]

Where do the figures of £75650 and £98k come from?

Surely all that is being transferred here is 25% of the CURRENT value of the property - discounted for having a sitting tenant. From girlfriend to nephew. Historic valuations, sister's share, and mortgage arrangements are all irrelevant to this figure.

We're all assuming of course there is actually some documentary evidence somewhere of the current 50/25/25 split? Is it registered as such at land registry? Or is there some written agreement? The contract of sale from yourself? If there isn't, all bets are off as to what the taxman assumes about the current ownership.

Gryff

[Lootman]

The only certainty in this whole sorry fiasco is how ludicrously complicated and incomprehensible SDLT is in anything other than the simplest of transactions. It's yet another example of ill-planned and hastily executed legislation, resulting in huge numbers of anomalies that weren't taken into account in the drafting process. Many professionals can't understand the law, so how on earth is a lay person supposed to do so?

Agreed. Would it really be so hard to just have a simple Transfer Tax, levied at say 1% of the property value changing hands?

[sg31]

Where do the figures of £75650 and £98k come from?

Surely all that is being transferred here is 25% of the CURRENT value of the property - discounted for having a sitting tenant. From girlfriend to nephew. Historic valuations, sister's share, and mortgage arrangements are all irrelevant to this figure.

We're all assuming of course there is actually some documentary evidence somewhere of the current 50/25/25 split? Is it registered as such at land registry? Or is there some written agreement? The contract of sale from yourself? If there isn't, all bets are off as to what the taxman assumes about the current ownership.

Gryff

The 25% owned by nephew and the 25 % owned by his girlfriend were bought from me. Trust me I made sure everything was done properly. The ownership %ages are well documented. I also ensured that a proper agreement was drawn up by a solicitor between the partners about what should happen in various situations. A break up was one such situation. I do think that the friendliness with which the split has occurred is in part due to the existence of that agreement.

The figures quoted are firstly a cash consideration and secondly the mortgage debt being taken over by nephew from his girlfriend.

[richlist]

I wouldn't suggest that this situation is an anomaly, or hastily thought out or rushed.....just because a few people on the internet don't have the correct answer immediately to hand.

There is no need to get frustrated because a complicated area of tax legislation confounds a few people who think they should know the answer. The definitive answer is available......It just needs a little patience to find it

Happy Christmas to All.

[TaurusTheBull]

The problem, as ever, is... what is the "correct answer" ?

It seems quite clear-cut to me, if previous paperwork is in order. Only those who acquire assets should be liable to SDLT, and if that isn't appropriate because they don't own any other property, and the new/increased asset value remains under the SDLT limit, then nothing needs to be paid.

Forums like this are very useful because they can establish whether a particular case is easily determined (for those without legal expertise) or not.

Tax law seems overly complicated. If the answer cannot be found online these days, one doesn't have much choice other than to resort to the expensive process for which a cynic might conclude these complications are made.

Taurus

[Trienburr]

I keep telling everyone I talk to that they should find a good solicitor and use them

This actually. Stamp duty rules are SO complicated

I heard that some changes are expected by March 2019

[richlist]

How can the SDLT rules be described as complicated when the HMRC web site contains a page giving the exact details of how to proceed in the OP circumstances ?

A link to the web page has already been provided on the thread.

[PinkDalek]

How can the SDLT rules be described as complicated when the HMRC web site contains a page giving the exact details of how to proceed in the OP circumstances ?

A link to the web page has already been provided on the thread.

Two links have been provided to HMRC Guidance. I’m unclear from the one you provided whether or not you now agree with Clitheroekid. As far as I can understand your replies, I don’t think you do.