HMRC & Property expert advice please

[JezzR0]

Hi All,

I have recently purchased a property for buy to let which has a plot of land that I believe will gain planning for a new dwelling.
At the start of the purchase I advised the conveyancer that I wanted to split the land at time of purchase so that I could raise a mortgage on the house with the land unemcumbered, making it easier to sell off, raise finances on to self-build, or build and then raise finances. I this way I avoid trying to get the land released by a buy to let mortgage company under the new strict financial rules etc, and the costs associated with it. There is also an issue with Stamp duty, as I would have to pay Stamp Duty on the later transfer to seperate dwelling.

The conveyancer has tried to split the land AFTER he had paid the stamp duty on the whole property and registered it with land registry. When he went to split the land as sent the stamp duty form to HMRC, he was advised that I cannot do this under XYZ statue, as cannot transfer a part of a property to myself.

I hold the opinion that the conveyancer has advised me wrongly (as he had no idea of this limitation) and should have advised to buy the property as two separate parts.

The question is whether there is some way to correct this situation with HMRC given that it was a conveyancing error not my error. There are email threads of evidence that this was the intention, etc. Surely it can't be a matter of "tough luck, you should have had a better conveyancer - but you can sue him".

Many thanks for all your valuable advise.

[AGoodman]

I don't see why this should be a tax issue - dividing the title would not incur any SDLT as you are not acquiring any new land or interest in land. This is not a transfer, just the creation of a new title at the Land Registry. The objection is not that you are transferring to yourself (you are not) but that the LR must have some discretion over whether to divide up an existing title into 2 or more.

There may be a practical difficulty in that the LR may resist dividing the title without cause - the only solution I can think of here is to do it either when the mortgage lender is involved (which would be a pain but must be accepted by the LR as it is necessary) or to tell the LR that you are doing it with a view to mortgaging the original title immediately thereafter. Bear in mind that if there are any pipes/drainage or cables under the garden these will have to be taken account of with easements etc.

It doesn't sound as though the conveyance has served you well but the SDLT would have been the same in any case.

[JezzR0]

Thank you AGoodman,
I would agree with you (on all counts), but the conveyancer advises that HMRC has declined the transfer because of a statutory regulation (I'll ask what has been quoted).
May be the issue is that the conveyancer is seeking SDLT certificate for registering a transfer and as it is not needed, HMRC is rejecting the request for the SDLT certificate.

Is the SDLT certificate required for splitting the land - i.e. is the conveyancer seeking to do something that is not needed?

Many thanks

[AGoodman]

I am not a conveyancer but I can't see the division of a title as a transfer and I am not sure what certificate would be necessary from HMRC. The old SDLT60 for exempt transfers was abolished years ago.

It would be clear that the division is not an SDLT transaction so I fail to see why HMRC should have anything to do with it. As mentioned, I am not a conveyancer and tax legislation can be wonderful in its weirdness so it is possible I am wrong but this makes little sense.

If the conveyancer has asked you to sign a TP1 (transfer of part of a title) transferring part from you to yourself then I suspect things have gone very wrong. I believe an application for the division of a title is usually made on form AP1.

I would ask your conveyancer to clarify exactly what has happened and do not be afraid to enquire further if you do not understand. Is the conveyancer a solicitor?

[maths]

I'm struggling to see the matter is an issue for HMRC.

However, where X owns a property with sole legal title the Land Registry are reluctant (if not refuse) to agree to an amendment to the Land Register showing that X now owns plot 1 (title 1) and also plot 2 (title 2). However, if X decided to sell part of plot 1 then at the time of sale LR will of course recognise two separate legal titles.