It has a £250k mortgage in both names.
Suppose Party A (genuinely) gifts his "50% share” of property to Party B for £0.
Party B takes out a new BTL mortgage on the Property to the sum of £225k (let’s say she has £25k to pay off on the mortgage when she takes out a new mortgage. She cannot pay the whole £250k mortgage all at once, though!)
(They’re not Connected Persons (as per CGT); they’re not married or in a relationship nor parents/children. Was worth £320k on purchase so £40k capital gain each)
Is any SDLT due on the mortgaged amount before or after the transaction?
Is there a way they can order the transactions to avoid SDLT (as Party B would be a second home owner, the higher rate is due even on £125k half-mortgage.)
- HMRC website says: "If the larger share is given outright as a gift If you take a bigger share but don’t pay anything in return, there’s no ‘consideration’ given including taking on liability for a mortgage. You won’t pay SDLT, even if the value of the extra part of the share is more than the SDLT threshold."
- HMRC documents says:
“Where there is the release or assumption of a debt (or the transfer of a property subject to a debt) the debt can constitute chargeable consideration for SDLT purposes. The relevant provisions are in paragraph 8 of Schedule 4 FA 2003.
The basic rule is that where the consideration for a land transaction consists in whole or in part of:
1) the satisfaction or release of debt due to the purchaser or owed by the vendor (paragraph 8(1)(a)); or
2) the assumption of ‘existing debt’ by the purchaser (paragraph 8(1)(b)),
the amount of debt satisfied, released or assumed is taken to be the whole or, as the case may be, part of the chargeable consideration for the transaction.
Where:
1) debt is secured on the property immediately before and after the land transaction; and
2) the rights or liabilities of any party in relation to that debt are changed as a result of or in connection with the transaction,
there is taken to be an assumption of debt by the purchaser falling within paragraph 8(1)(b).
This is an anti-avoidance provision intended to prevent parties temporarily paying off secured debt before property is transferred and reinstating it immediately afterwards.” - I’m aware mortgages = chargeable consideration for SDLT. I’m aware this may be worsening things from CGT perspective as Party B acquires half the property at £0(!)…
- I’ve also had a read of this: sdlt-due-on-transfer-of-equity-btl-t49049.html
