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Where Taxpayers and Advisers Meet

SDLT on part of inherited property

egwechris
Posts:7
Joined:Sat Apr 01, 2017 12:35 pm
SDLT on part of inherited property

Postby egwechris » Sat Apr 01, 2017 12:42 pm

My wife has inherited 1/3 of a property from her mother. We are moving in to the house and it will be our only property.
I understand that we only pay SDLT on the 2/3 of the property we are purchasing.
The mother's estate also has significant debts, which as the purchasers, we will end up paying.
My question is: should we pay SDLT on the 2/3 of the value of the property, or should the debts be paid first and we only pay SDLT on 2/3 of the remaining sum?
I hope I've explained it clearly!

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: SDLT on part of inherited property

Postby maths » Sat Apr 01, 2017 5:56 pm

SDLT is payable on the consideration paid for the acquisition of the 2/3rds.

The acquisition may be either from the executors or the persons who inherit the 2/3rds.

egwechris
Posts:7
Joined:Sat Apr 01, 2017 12:35 pm

Re: SDLT on part of inherited property

Postby egwechris » Sat Apr 01, 2017 9:58 pm

Thanks for the reply.
Can you please clarify as I'm struggling to understand what counts towards the consideration in this case.
Should the debts count towards the consideration?

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: SDLT on part of inherited property

Postby maths » Sat Apr 01, 2017 10:18 pm

Is mother's estate solvent or insolvent ie are there sufficient assets in the death estate to cover the debts of the estate?

egwechris
Posts:7
Joined:Sat Apr 01, 2017 12:35 pm

Re: SDLT on part of inherited property

Postby egwechris » Sat Apr 22, 2017 5:34 pm

The estate is solvent. There are sufficient assets to cover the debts

egwechris
Posts:7
Joined:Sat Apr 01, 2017 12:35 pm

Re: SDLT on part of inherited property

Postby egwechris » Sat Apr 22, 2017 5:51 pm

To be exact, and hopefully explain clearly, the house has been valued at £600k. The estate has debts of £55k.
Do the debts need to be taken into account when calculating the purchase price?
The estate's solicitor says we should pay SDLT on the value of the house less the amount my wife has inherited.
(ie. £600k - £55k debts = £545k. Split 3 ways = £181667 inherited per child. Therefore SDLT payable on £600000 - £181667 = £418333)
Our solicitor says the opposite - the value paid for the house should not include the debts.
(ie. £600k - £55k debts = £545k. Split 3 ways = £181667 inherited per child. Therefore SDLT payable on 2 x £181667 = £363334)
Who, if anyone, is right?

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: SDLT on part of inherited property

Postby maths » Sun Apr 23, 2017 11:42 am

If the estate has sufficient assets over and above the 600k property to discharge the 55k estate debts then it seems to me that SDLT is payable on the consideration for purchasing a 2/3rds interest in the 600k property ie 400k.

If, however, there is not sufficient assets (or no such assets) to discharge the 55k (as there is only the property) then the executors need somehow to fund the 55k. The person wanting to buy the other 2/3rds out could, for example, loan the executors 55k to settle the estate debts. That person's loan can then be repaid by way of an allocation of an interest in the property worth 55k leaving the remaining 545k to then be split 3 ways ie 181,667 each. SDLT will then be payable on 181,667 x 2 ie 363,334.

Each beneficiary is entitled to 1/3 of [600 - 55] ie 181,667. Once the buyer buys out the other two they each get their 181,667 as expected.
The buyer loaned 55k and got back 55k as an interest in the property. He then got his 181,667 as expected.

egwechris
Posts:7
Joined:Sat Apr 01, 2017 12:35 pm

Re: SDLT on part of inherited property

Postby egwechris » Sun Apr 23, 2017 6:41 pm

Thank you very much Maths. That explains it perfectly.

egwechris
Posts:7
Joined:Sat Apr 01, 2017 12:35 pm

Re: SDLT on part of inherited property

Postby egwechris » Tue Apr 25, 2017 2:15 pm

I have one last question please. It has been suggested to me that it is "HMRC's practice to treat deceased parties as unconnected", therefore the 2 payments of £181667 to the other siblings can be treated as separate SDLT transactions. This would significantly reduce the amount of SDLT paid but sounds too good to be true! Is it correct?

SDLT Geek
Posts:232
Joined:Sun Apr 30, 2017 5:45 pm

Re: SDLT on part of inherited property

Postby SDLT Geek » Sun Apr 30, 2017 6:06 pm

Whilst it is the case that your wife is not connected with her mother's estate for stamp duty land tax purposes, that is not of much relevance here.

It sounds as if your wife is buying two shares of 1/3 each from two siblings of hers. The two siblings are connected with each other, so the two transactions are likely to be linked transactions for SDLT purposes.

If instead you buy the 2/3 share from the executors then you have a single transaction anyway, so nothing is gained from the rule that death breaks family connections.


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