SDLT impact of varying ownership % of jointly held with spouse mortgaged property

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    SDLT impact of varying ownership % of jointly held with spouse mortgaged property

    Hi All

    I've been through many of the historic posts but haven't found a clear answer to this point (but happy to be pointed in the right direction).

    I jointly hold a mortgaged investment property with my wife, 50/50 as joint tenants and both on the BTL mortgage. 50% of the current mortgage value is above the SDLT threshold and so this is a matter of applicability of the consideration provisions for SDLT.

    I would like to move 49% of the beneficial interest to my wife (lower tax rate) through re-registering as tenants in common and entering in to a DoT to formalise this (and Form 17 to notify HMRC of the change). Giving a 99/1% split in ownership and income. I appreciate that my mortgage provider may have a view on this.

    The DoT would seek to clarify that only the net equity interest is being gifted, however, is there an implicit presumption or other mechanism by which HMRC would deem there to be consideration passing for this change of ownership (and thus bringing in the issue of SDLT)? As I see it, we would both remain jointly responsible for the full mortgage due on the property and the change in ownership percentage would not impact this (therefore no consideration and no SDLT). Clearly as a second property and with the additional 3% this becomes more of a material matter to get right.

    Does anyone have any experience of this matter? I will probably seek a steer from HMRC or professional advice but wanted to canvass views first.

    Many thanks in advance for any assistance.



    #2
    If you + wife are registered as "joint tenants" at Land Registry , the Tax Office will automatically assume that each "joint tenant" is entitle to 50% of the rental income.

    You can change the distribution of income to 1%: 99% by producing a "Declaration of Trust" and informing HMRC by Form 17 within 60 days of signing the DOT.

    You should seek advice from a solicitor before proceeding. As far as I know, you are staying registered as "joint tenants" i.e no change to property title and no sdlt to pay.

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      #3
      Don't use the word 'gifted'! You aren't gifting her anything, you are transferring another 49% of the debt to her. If she owns other property and the 49% is above 40k then she will have to pay at least 3% surcharge on the full amount.

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