Stamp duty payable on transfer of equity of a mortgaged property?

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    Stamp duty payable on transfer of equity of a mortgaged property?

    Hi all,

    I own a property in my sole name and am currently completing a remortgage and transfer of equity to my partner with an unequal split. We'll submit the Form 17 alongside a Declaration of Trust to HMRC after the completion.

    As it is a mortgaged property, although I'm not transferring existing mortgage, I am not sure if the mortgage is treated as a chargeable consideration so that stamp duty is payable?

    My solicitor said: "We do not consider the existing mortgage to be taken as consideration for the transaction as Land Registry have previously advised us this is not a requirement, and as there is no actual money changing hands, the consideration should be taken as zero." And Declaration of Trust we prepared is also silent on the mortgage shares.

    However, I consulted with an accountant who said HMRC may see mortgage as a chargeable consideration and it's recommended to submit a SDLT return, but I wasn't given a definitive yes or no.

    I'm a bit confused who is actually right?

    I think that SDLT amount is actually nil based on the percentage my partner will own, due to the current stamp duty holiday. I could submit a SDLT return but may have to pay an accountant to get it right And is there any downside if I do submit one? For instance, we do prefer the mortgage shares to be flexible between us.

    Thanks in advance!

    #2
    Slightly confused about this.
    If you’re not married to your partner, what are you actually trying to achieve?
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      You don’t need to tell HM Revenue and Customs (HMRC) about some land and property transactions which are exempt from SDLT. They include:
      • transactions where no money or other type of payment changes hands
      • property left to you in a will
      • property transferred because of divorce or dissolution of a civil partnership

      https://www.gov.uk/guidance/stamp-du...-need-a-return

      Comment


        #4
        Originally posted by jpkeates View Post
        Slightly confused about this.
        If you’re not married to your partner, what are you actually trying to achieve?
        Sorry for the confusion. We're married. I'm transferring some equity to my wife as she's a basic rate taxpayer.

        Comment


          #5
          Originally posted by Gordon999 View Post
          You don’t need to tell HM Revenue and Customs (HMRC) about some land and property transactions which are exempt from SDLT. They include:
          • transactions where no money or other type of payment changes hands
          • property left to you in a will
          • property transferred because of divorce or dissolution of a civil partnership

          https://www.gov.uk/guidance/stamp-du...-need-a-return
          Thanks!

          I think my solicitor's point is based on "transactions where no money or other type of payment changes hands". However, my accountant said if the property is mortgaged then the mortgage amount may be a chargeable consideration for SDLT. So I'm a bit confused..

          Comment


            #6
            Originally posted by Snowynight View Post

            Thanks!

            I think my solicitor's point is based on "transactions where no money or other type of payment changes hands". However, my accountant said if the property is mortgaged then the mortgage amount may be a chargeable consideration for SDLT. So I'm a bit confused..
            You're accountant is correct. If you have transferred part ownership to your wife and her share of the new mortgage is more than 40k then sdlt will be payable. If she owns a share in another property then I believe 3% will be payable on the entire consideration.

            Comment


              #7
              Originally posted by Kape65 View Post

              You're accountant is correct. If you have transferred part ownership to your wife and her share of the new mortgage is more than 40k then sdlt will be payable. If she owns a share in another property then I believe 3% will be payable on the entire consideration.

              Thanks! I gifted her part ownership but am not transferring mortgage and there's no cash changing hands. Or does it automatically imply the mortgage shares need to follow our equity shares? Based on the percentage, it would be over 40k but SDLT is nil because of stamp duty holiday.

              on the 3% higher SDLT rate, we did check that it doesn't seem to apply to transfer between spouses any more:
              https://www.gov.uk/hmrc-internal-man...0of%20purchase. There's an example too:
              " Example

              Mr I is transferring 50% of a buy-to-let property that he owns to his wife, Mrs I. Mrs I is paying some cash and taking over responsibility for half the mortgage debt. Mrs. I owns no other residential property, but Mr I owns a number of other buy-to-let properties. 

              For transactions with an effective date before 22 November 2017, the higher rates would have applied to the transfer as Mr I owns other residential properties. As a married couple other residential property owned by either spouse is taken in account in determining whether the higher rates apply. 

              For transactions with an effective date on and after 22 November 2017, the higher rates do not apply as a transfer between spouses is disregarded as above. 
              "

              Comment


                #8
                You said "on the 3% higher SDLT rate, we did check that it doesn't seem to apply to transfer between spouses any more:"

                Are you married to your partner ?

                Comment


                  #9
                  Originally posted by Snowynight View Post
                  Thanks! I gifted her part ownership but am not transferring mortgage and there's no cash changing hands. Or does it automatically imply the mortgage shares need to follow our equity shares?
                  If the mortgage is in your name and you've transferred part ownership to your wife, what did you do about the lender's charge on the property?
                  Your lender is unlikely to want to lend against part of a property.

                  When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                  Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                  Comment


                    #10
                    Originally posted by Gordon999 View Post
                    You said "on the 3% higher SDLT rate, we did check that it doesn't seem to apply to transfer between spouses any more:"

                    Are you married to your partner ?
                    Yes, we are married.

                    Comment


                      #11
                      Originally posted by jpkeates View Post
                      If the mortgage is in your name and you've transferred part ownership to your wife, what did you do about the lender's charge on the property?
                      Your lender is unlikely to want to lend against part of a property.
                      Thanks for the reply!

                      We are having a remortgage so my wife's name is added to the mortgage too, but I'll be the one who continues to pay the mortgage (with my account). Does this still mean a transfer of mortgage or not?

                      Comment


                        #12
                        Originally posted by Snowynight View Post
                        We are having a remortgage so my wife's name is added to the mortgage too, but I'll be the one who continues to pay the mortgage (with my account). Does this still mean a transfer of mortgage or not?
                        Yes.

                        Essentially your wife joining the mortgage means that this isn't a gift, it's a sale at 50% of the value of the mortgage for SDLT purposes.
                        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                        Comment


                          #13
                          Originally posted by jpkeates View Post
                          Yes.

                          Essentially your wife joining the mortgage means that this isn't a gift, it's a sale at 50% of the value of the mortgage for SDLT purposes.
                          Hm ok, thanks. My solicitor's argument was "We do not consider the existing mortgage to be taken as consideration for the transaction as Land Registry have previously advised us this is not a requirement, and as there is no actual money changing hands, the consideration should be taken as zero."

                          I suppose to be on the safe side I shall still submit a SDLT return. I'll have a look at the "Land Transaction Return" form and see if I need to find an accountant to do it.

                          Note that we have unequal shares. Do the mortgage shares need to follow our equity shares or 50%/50%? I believe the SDLT payable is zero currently because of the SDLT holiday.

                          And is there any downside if I do submit one? For instance, we do prefer the mortgage shares to be flexible between us, e.g., if I can offset more mortgage interest amount against rental income.

                          Comment


                            #14
                            The rules for paying SDLT on transfers solely between spouses living together state :

                            From 22 November 2017, the higher rates rules disregard transactions solely involving the transfer of interests between spouses or civil partners while they are treated as living together on the date of purchase.

                            it means the sdlt payment on "consideration" due to taking on share of mortgage loan above £40K does not apply to transfers between spouses.

                            When you register the property title as "tenants in common" , you can choose any % split below 40K for wife to be on the safe side ; and afterwards change the % split in the Declaration of Trust.( DOT )

                            The mortgage loan is secured by the property , not by the mortgage share.

                            The reporting of rental income in tax return follows the % split in the DOT .

                            Comment


                              #15
                              Originally posted by Gordon999 View Post

                              it means the sdlt payment on "consideration" due to taking on share of mortgage loan above £40K does not apply to transfers between spouses.
                              Is this true? Or is it just the higher rate that doesn't apply?

                              Comment

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