Residential Investment Property Transfer Stamp Duty Question

by **tax_schmax** on Tue Oct 18, 2011 10:28 am

I have a situation in which 3 brothers own a property which carries a small gain. If they each transfer half their share to their spouse, the gain is within the available allowance. There is no mortgage and no consideration will be made by the spouses. Is there any stamp duty and does the transfer need to be registered with Land Registry?

by **Incredulum** on Tue Oct 18, 2011 10:48 am

tax_schmax wrote:the gain is within the available allowance.

I do not understand why you think there will be any gain arising at all for a transfer between spouses. Please explain.

SDLT is calculated based on consideration, and consideration includes taking on debt (i.e. if there were a mortgage). It appears consideration is nil, and SDLT is calculated on that sum?

by **tax_schmax** on Tue Oct 18, 2011 11:00 am

Thanks for clearing up the SDLT part of the question. That was my main concern.

To clarify the query you raise:
The gain per owner would be below £10K after the husbands gift 50% of their share to their respective wives.

In your opinion, does just sharing the sale proceeds demonstrate shared beneficial ownership between spouses?

by **Incredulum** on Tue Oct 18, 2011 11:20 am

Bemused.

"sharing sales proceeds" - you said there was to be no consideration.

"Gain" - the transfer to spouses is no gain/no loss.

On your other point: a H can gift to a W. Sharing the benefits of the gift i.e. presumably rent, should show this.

by **tax_schmax** on Tue Oct 18, 2011 11:50 am

OK. I appreciate your help.

Excuse the brevity of my comments. You may well remain bemused. However, I am in a much more informed position.

Many thanks.

by **Incredulum** on Tue Oct 18, 2011 12:03 pm

Well see if I care then. I think I now understand, and I'm not sure - given the additional points - I have enough information to comment on beneficial ownership. However, I am in a much more informed position than you. Please therefore ignore my point on beneficial ownership.

by **section 44** on Tue Oct 18, 2011 12:16 pm

Incredulum wrote:a H can gift to a W. Sharing the benefits of the gift i.e. presumably rent, should show this.

Unless the joint tenancy has already been severed, none of the bothers would have anything to gift to his wife. The three brothers could (together) enter into a declaration of trust but that may give rise to an exchange for SDLT purposes.

by **maths** on Tue Oct 18, 2011 1:31 pm

SDLT arises if there is chargeable consideration. On a gift there is no such consideration unless a mortgage is involved.

Hence, no SDLT.

Assuming each own as tenants in common (if not simply sever the joint tenancy) then each can give say 50% to the spouse; no CGT as inter-spouse. Gifting achievable by each of the brothers simply then declaring he owns the legal title on trust for himself and wife say 50/50 beneficially.

No need to inform LR as legal title remains the same and LR not interested in beneficial ownership.

by **section 44** on Tue Oct 18, 2011 1:59 pm

If they have already severed the joint tenancy then it is simple enough (in terms of SDLT).

But if they haven't already severed the joint tenancy then there would appear to be an exchange and not a gift. Would the three brothers jointly declare a trust to give the wife of one of the brothers (only) a beneficial interest in the property? Or perhaps two of the brothers would only agree to that declaration of trust because their respective wives would also receive a beneficial interest in the property.

by **tax_schmax** on Tue Oct 18, 2011 2:45 pm

Thanks for the extra detail.

HMRC have the final say as always. The question was posed as a precursor to instructing my clients to take further advice which they will be doing. At least I now know what the adviser will be focussing on.