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Where Taxpayers and Advisers Meet

Can I Transfer 50%-90% of jointly owned property and avoid Stamp Duty

semantics18
Posts: 2
Joined: Sat Oct 10, 2020 9:36 pm

Can I Transfer 50%-90% of jointly owned property and avoid Stamp Duty

Postby semantics18 » Sat Oct 10, 2020 11:29 pm

My Wife and I own 3 properties. 1 is free hold and is occupied by my brother and his family, 1 is our residential home and still has a mortgage of around 70K and the last is a rental property on a interest only Buy to let mortgage of 159K.

We are due to retire and we are looking to re-mortgage all three properties to give part ownership in order to reduce our estate and to extend the mortgage before banks refuse due to our age.

On our free hold property, Can I transfer 90% ownership to my brother and his wife who lives in the property and remortgage with the 4 of us jointly to release some of the equity.

On my residential property I will come off when we re-mortgage and transfer my 50% to my Son. My Son will therefore own 50% and my Wife will own 50%

My Rental property will be taken off the market and will be occupied by my Daughter and her husband. When we re-mortgage to a Residential Mortgage I will remain as a 50% owner and my Son will receive my wife's 50%

Will Transferring the properties in the way I have described still incur Capital Gains Tax/Stamp Duty or cause any issues with Inheritance Tax while reducing the value of my estate provided we live for 7 years.

bd6759
Posts: 3297
Joined: Sat Feb 01, 2014 3:26 pm

Re: Can I Transfer 50%-90% of jointly owned property and avoid Stamp Duty

Postby bd6759 » Sun Oct 11, 2020 10:54 am

You will be liable to CGT on the market value interests that you dispose.

SDLT is payable by persons acquiring an interest, based m the consideration. This includes the assumption of any debt.

I doubt you will be able to mortgage the ex-rental house because you don’t own it.

I can’t imagine what you are trying to achieve with this convoluted arrangement.

maths
Posts: 7998
Joined: Wed Aug 06, 2008 3:25 pm

Re: Can I Transfer 50%-90% of jointly owned property and avoid Stamp Duty

Postby maths » Sun Oct 11, 2020 5:58 pm

If you continue to live in your residence after you transfer your 50% to your son then for IHT your 50% will be treated as still falling within your estate on your death subject to taking steps to preclude this from happening.

The gifts will for IHT constitute PETs (note the comment above).

SDLT will be in point; note that taking over a liability (eg mortgage) constitutes chargeable consideration.

What are you trying to achieve?

semantics18
Posts: 2
Joined: Sat Oct 10, 2020 9:36 pm

Re: Can I Transfer 50%-90% of jointly owned property and avoid Stamp Duty

Postby semantics18 » Sun Oct 11, 2020 10:09 pm

Hello bd6759 & maths, thank you for your responses.

My Wife and I are in our 60s and the mortgages have about 6 years left. The last conversation I had with my bank about re-mortgaging my properties stated that due to our age we will likely not be able to get more than a 10 year mortgage which will make monthly payments unsustainable for us. My son is in his 30s so we are hoping to remortgage for 20 years. The reason for the 50% split is because it will take either my wife or myself being on the mortgage to pass an affordability check.

The rental property is still owned by us, we just want to switch from a Buy to Let to a residential because the bank will not allow family to move in as per the Buy to Let Mortgage restrictions.

As stated we are also attempting to reduce our estate.

Property 1 (Transfer of 90% to my brother) - Property value £500,000 (Freehold) to be Re-mortgaged for 200,000 to free up some cash My brother will be paying the mortgage.
Property 2 (Transfer of 50% to my Son) - Property value £420,000 (Mortgaged £70,000)
Property 3 (Transfer of 50% to my Son) - Property value £520,000 (Mortgaged £159,000)

As you have stated that stamp duty is still payable I am going by the information on this site and the zoopla site below to estimate some figures. please let me know if i am way off the mark.
https://www.thelawsuperstore.co.uk/help-and-advice/transfer-of-equity-costs

in particular this paragraph
For example, a property may have equity of £600,000 and a mortgage of £200,000. If you take on 50% of the equity and 50% the mortgage, this will total to £400,000. Under the current holiday you would not pay Stamp Duty.
https://www.zoopla.co.uk/discover/property-news/is-it-time-for-a-stamp-duty-holiday/
These are the new holiday rates:

Up to £500,000: 0%
On the portion from £500,001 to £925,000: 5%
On the portion from £925,001 to £1.5m: 10%
Above £1.5m: 12%
The 3% stamp duty surcharge will apply on top of the new holiday rates, so people buying additional homes will attract a 3% stamp duty bill on the first £500,000 of property.

My estimates for paying stamp duty.

Property 1 Transfer value 450,000 (£13,500 payable it will be their second home purchase)
Property 2 Transfer value 245,000 (210,000 Equity + 35,000 Mortgage) (No Stamp Duty Payable)
Property 3 Transfer value 339,500 (260,000 Equity + 79,500 Mortgage) (No Stamp Duty Payable)

I am not sure if transferring 50% of one property and then 50% of the other will count as a second property purchase.

If the above method is as you have stated convoluted, what would you recommend.
again thanks for your response.

bd6759
Posts: 3297
Joined: Sat Feb 01, 2014 3:26 pm

Re: Can I Transfer 50%-90% of jointly owned property and avoid Stamp Duty

Postby bd6759 » Mon Oct 12, 2020 1:46 pm

You didn’t mention amounts in your first post. SDLT is due, but the rate might be 0%

I have no idea what you are trying to achieve, so can’t suggest an alternative.

The banks might have something to say is you give away properties on which you have secured a loan. It seems that you won’t own any properties, so what are going to secure the loans on?

You son will have 2 properties so the additional SDLT rate will apply.

CGT will apply to the disposals.

Properties 1 and 3 will remain in your IHT estate for 7 years.

Property 2 will remain in your IHT estate for as long as you live in it.


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