SDLT on transfer of equity of unequal shares

[chrisburrell]

Hi

I'm in the process of remortgaging and as part of this I need to do a transfer of equity because the lender requires it. We've decided to go for unequal shares so that have 5% and my wife keeps 95% (she owned the whole property before). I previously bought a property that I rent out ever since we got married. So I've been living in the property we're remortgaging for more than 18 months now. The property we're remortgaging is worth around 250k and the mortgage on it is around 140k

My understanding from the website is that I most likely wouldn't qualify for SDLT because of the property we're remortgaging is the primary property of residence? Furthermore, even if I did fall into the additional tax rates for SDLT, wouldn't the fact I'm only taking 5% mean I would pay 5% * 140k * 3%, (e.g. £210?)

Can you help me work out what the right value of SDLT is?
Thanks
Chris

[someone]

My understanding:

You are purchasing a 5% share in the property for a consideration of 7K (5% of 140K).

You would be liable to SDLT on this, and the higher rate because you own another property (you only don't pay the higher rate if you're buying your first property or replacing your main residence - as there's no disposal there's no replacing)

However, my understanding is that there's a 40K threshold for stamp duty. As the interest you are purchasing has a consideration of less than 40K then there's no SDLT to pay at all.

[bd6759]

However, my understanding is that there's a 40K threshold for stamp duty. As the interest you are purchasing has a consideration of less than 40K then there's no SDLT to pay at all.

Correct

[chrisburrell]

Hi
Thanks both for the prompt feedback. In terms of getting back to my solicitor, are you guys accountants/solicitors/conveyancers?

Do you have any tips on how to convince them they are wrong? They think the consideration is £140k because apparently "At the time o the transfer the the shares agreement will not be in place and therefore regardless of whether you are taking on 5% or 95% of the property, at the time of completion, the consideration calculation will still be half of the existing debt."

Thanks
Chris

[someone]

Hi
Thanks both for the prompt feedback. In terms of getting back to my solicitor, are you guys accountants/solicitors/conveyancers?

Do you have any tips on how to convince them they are wrong? They think the consideration is £140k because apparently "At the time o the transfer the the shares agreement will not be in place and therefore regardless of whether you are taking on 5% or 95% of the property, at the time of completion, the consideration calculation will still be half of the existing debt."

Thanks
Chris

I am neither a solicitor, nor an accountant. I just have an interest in the bits of taxation law that affect me.

In this case I suspect your solicitor could be correct. However, I don't think he has to be correct. I think your wife could give you a 5% interest via a declaration of trust and then could make you a trustee, putting you onto the deeds and achieving the goal that you want. I think that would achieve the same aim but without you ever having more than a 5% interest.

I'm not exactly clear how owning beneficial interest as tenants in common with the legal title as joint tenants differs from owning as tenants in common with the legal title held by a single trustee.(by which I mean I don't know if there is always a declaration of trust or whether when the legal title is held jointly there's a way to be tenants in common without a DoT) But the second is a fairly standard way to achieve a rental income split without having to go through all the paperwork of changing the legal title. But I'm pretty sure it must be possible to get to tenants in common in unequal shares without passing through joint tenants.

[Superfly]

Hi
Thanks both for the prompt feedback. In terms of getting back to my solicitor, are you guys accountants/solicitors/conveyancers?

Do you have any tips on how to convince them they are wrong? They think the consideration is £140k because apparently "At the time o the transfer the the shares agreement will not be in place and therefore regardless of whether you are taking on 5% or 95% of the property, at the time of completion, the consideration calculation will still be half of the existing debt."

Thanks
Chris

Im assuming its a property solicitor you are referring to and they are quite often wrong when it comes to SDLT because its a complex tax. Its a difficult one because its your opinion versus their opinion. You are paying them so you can insist you are right but there's always a risk that you aren't. You may want to pay for advice and that way you may save yourself a headache or two.

[maths]

I would suggest to the solicitor that the position re SDLT is set out in FA 2003 Sch 4 para 8(1B) ie that the SDLT charge is levied on the % of beneficial ownership acquired which in your case seems to be simply 5%. The quote you refer to seems to me nonsensical.

The remortgage, adding additional name to legal title and execution of declaration of trust splitting 95/5 all occurs at the same time.