Stamp duty when changing the beneficial interest share

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    Stamp duty when changing the beneficial interest share

    My wife and I have a joint buy to let property, where the beneficial interest is split 50/50 and where we're both on the mortgage which is £210,000.

    As she isn't working at the moment and I'm a higher rate tax payer we want to switch the beneficial interest so she has 99% and I have 1% so we can save on income tax.

    Will she have to pay stamp duty to do this?

    I understand stamp duty is payable where someone either pays for a share in a property, or takes on a mortgage to do so. But if she's already on the mortgage - i.e with joint and several liability - she won't have to pay any stamp duty to increase her share, as it makes no sense to be 99% and severaly liable for a mortgage. So my thinking is she wouldn't but I'd like to check this is correct if there are any experts here.

    #2
    Check if your 50/50 ownership at Land Registry is registered under "joint tenants" or "tenants in common" ?

    If it is "tenants in common", no change is required ( and no stamp duty to pay ) .

    Then you can change ratio to 99/1 by using a separate deed of trust and serving form 17 on hmrc.

    https://www.taxinsider.co.uk/1620-Jo...al_Points.html

    Comment


      #3
      - Stamp duty is not payable on gifts where not mortgaged
      - Stamp duty is payable on gifts where mortgaged (on the mortgaged part of the transfer)
      - The fact that transfer takes place via a Deed of Trust (which is the only way it can do) is totally irrelevant to the stamp duty position. The fact that the legal title is not changing is irrelevant to stamp duty.

      If you want to do the transfer of interest to save tax you do have to inform HMRC of the transfer via form 17 so they will know of it.

      Comment


        #4
        To add: The jointly and severally liability bit -- is not relevant to anything here. All that has to do with is who mortgage company can sue for repayment of the whole (one or both) when things go wrong.
        It has to do with the liability for the loan - not ownership (in theory I can be liable to repay a loan and yet have no ownership at all).

        You will need to inform the mortgage company too of any beneficial transfer as it is an actual transfer (if you get divorced, die or your wife gets sued over some incident she will actually OWN 99%). More than inform -- you need to seek their permission.

        Comment


          #5
          Hi Andrew,

          Thanks for your thorough answer.

          Are you saying if I transferred some of my share to my wife then she would still need to pay stamp duty? And if so how much would she pay in our situation in the original post if we changed the ownership to 99/1 in her favour?

          Comment


            #6
            Stamp duty on 49% of £210,000. You could I suppose hide the deed of trust, but it could come back to bite you very badly. HMRC Tax audits are no fun, and they will extend to every aspect of your tax affairs and you will under the radar going forward.

            Liability for the mortgage (per the mortgage company if they allow the change) is not really relevant. HMRC is concerned with a transfer of 49% of beneficial ownership under the mortgage.

            Comment


              #7
              Yes that makes sense, thank you. So stamp duty on around 105k.

              My question then is does the 125k stamp duty threshold apply to her here? (In which case no tax is payable).

              The Gov.uk guidance states:

              "You must pay the higher SDLT rates when you buy a residential property (or a part of one) for £40,000 or more, if all the following apply:
              • it will not be the only residential property worth £40,000 or more that you own (or part own) anywhere in the world
              • you have not sold or given away your previous main home
              • no one else has a lease on it which has more than 21 years left to run"
              https://www.gov.uk/guidance/stamp-du...ntial-property

              She doesn't own the property we live in as only I'm on the title deeds and mortgage and she doesn't own any other properties. That would mean she doesn't meet the first bullet pointed test so the higher rate isn't applicable, which means the 125k threshold still applies and so she doesn't pay any stamp duty?

              Comment


                #8
                Originally posted by Nick88 View Post
                Yes that makes sense, thank you. So stamp duty on around 105k.

                My question then is does the 125k stamp duty threshold apply to her here? (In which case no tax is payable).

                The Gov.uk guidance states:

                "You must pay the higher SDLT rates when you buy a residential property (or a part of one) for £40,000 or more, if all the following apply:
                • it will not be the only residential property worth £40,000 or more that you own (or part own) anywhere in the world
                • you have not sold or given away your previous main home
                • no one else has a lease on it which has more than 21 years left to run"
                https://www.gov.uk/guidance/stamp-du...ntial-property

                She doesn't own the property we live in as only I'm on the title deeds and mortgage and she doesn't own any other properties. That would mean she doesn't meet the first bullet pointed test so the higher rate isn't applicable, which means the 125k threshold still applies and so she doesn't pay any stamp duty?
                Yes the usual thresholds will apply.

                I see no reason the higher SDLT would not apply - bizarre as that seems. The real problem is that laws and their ramifications are not properly spelled out or considered before enacting.

                If you main intention is to cut tax on rental income you are going to have to declare the new split and any Trust via form R17 so HMRC will know about it, an will likely search HMLR for any mortgages if they are in any way competent (which is not always the case). The thing would be easier is if she were not your wife as you could then simply declare an interest in the rents which even more bizarrely (in contrast to the married situation) seemingly does not require the split to reflect the actual beneficial interest in ownership..... Seems dumb to me

                Comment


                  #9
                  Yes that does sound strange. But I think there is a scenario where the higher rate doesn't apply in our case. I've just noticed the previous link I posted also states under the Transactions heading:

                  "If you’re transferring ownership (or part ownership) of a residential property to your spouse, the higher rates do not apply as long as no one else is involved in the transfer.

                  If you want to increase the amount of a property that you already own, you do not have to pay the higher rates when all the following apply:
                  • you already own 25% or more
                  • the dwelling has been your only or main home for the previous 3 years
                  • (if you’re extending a lease) your lease still has 21 years or more left to run"
                  So in my scenario once we had owned the buy to let for three years the higher rate would no longer apply and so she wouldn't have to pay any stamp duty if we did the transfer after three years of owning it?

                  Comment


                    #10
                    Thanks - that is useful to know.... (it may all change 6 days from now where workers and normal people may get hammered in all sorts of ways if this fascist http://markhumphrys.com/jeremy.corbyn.html gets into power... )

                    Comment

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