SDLT and Assent

[oxfordfox]

An estate includes two properties. There are two executors - a solicitor and a lay executor. The latter is also a beneficiary.

The executors transfer both properties to the executor who is a beneficiary. This executor had previously made a loan to the estate to pay IHT. The total value of the two properties is more than the net inherited amount due to the beneficiary. So instead of having the IHT loan repaid, he in effect 'pays' the excess over and above net inheritance by not receiving repayment of the IHT loan in cash.

Is the IHT loan in effect 'chargeable consideration' and so SDLT is due on this sum?

To transfer the properties the executors opted to Assent. However, they transferred the properties into joint names - the executor and his wife. The wife is not a beneficiary of the will.

By naming the wife as a transferee (beneficiary) on the AS1 forms, when she is not a beneficiary, have the executors behaved dishonestly and outside their legal rights?

[SDLT Geek]

I am just commenting on the issue of whether the loan the beneficiary made to pay IHT is "chargeable consideration" for the assent that was later made to that beneficiary and his wife.

Yes, if the loan was released in return for the property being assented then the amount of the loan released counts as chargeable consideration for the assent, so depending on the amount of the loan released stamp duty land tax could have been due. If the properties are residential properties then it sounds very likely that the higher rates for additional properties will be due.

[oxfordfox]

Many thanks for this.

The two properties are residential flats which are buy-to-let flats. Together they are worth c£500k and the 'chargeable consideration' would be c£200k.

The beneficiary and his wife already own a family home, so I would be interested to know what the higher rate SDLT would be in this case? The executors claim that no SDLT is due as it is inherited property.

Also if anyone can answer my second question it would be appreciated. It appears that to try and support their argument for no SDLT, the executors have assented the properties. But as the wife is not a beneficiary I am interested to know if the executors have behaved improperly in naming her as a beneficiary in this assent?

[SDLT Geek]

If the chargeable consideration is £200,000 I would expect the SDLT to be £6,000 at the higher rates as multiple dwellings relief could be claimed.

[someone]

I'm not disagreeing with SDLT geek - I have no knowledge or experience with which to disagree.

However, as I'm reading it it seems very unfair.

In a fair world, if you inherit something, then you should be able to receive it and then raise any money needed to pay IHT in whatever way you want, including a mortgage on the property.

But HMRC will not allow the property to be inherited until the IHT is paid.

So, in this case, it appears that the beneficiary has loaned money to the estate to pay the IHT and has then been taxed on that loan.

I don't know if there were any other beneficiaries, but assuming not, then the beneficiary should have given the money to the estate - then there would be no loan to discharge and there would have been no SDLT to pay.

(Anyway, the beneficiary appeared to have no problem lending 200K to the estate - so I guess a 6K tax bill is annoying rather than anything else)

[oxfordfox]

I disagree. It was the executor's choice to make the loan for IHT. He could have organised a bank loan, but chose not to.

In any event, the 'loan' for IHT is something of a red herring. The key point is that he has paid extra to receive the properties, as these were worth more than his inheritance.

The issue is that the executors appear to have evaded SDLT. I suspect the assent to the wife is an attempt to justify this tax evasion as inherited property is not subject to SDLT. Therefore I would still like to know if assenting to a non-beneficiary is improper behaviour by the executors?