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Where Taxpayers and Advisers Meet

Stamp Duty and Chargeable consideration

Haydon1
Posts: 3
Joined: Fri Feb 08, 2019 10:53 am

Stamp Duty and Chargeable consideration

Postby Haydon1 » Fri Feb 08, 2019 11:42 am

Hello
I am trying to calculate if stamp duty is due.
The property is being transferred from two people to one. The property was originally purchased with a joint mortgage as Tenants in Common in unequal shares. 36% and 64%.
The person taking over the property and mortgage is the 64% share holder.
I am being told by the solicitor that chargeable consideration would be calculated as follow:

Cash being paid for the other persons share 35,000
50% of the mortgage debt 115000
Total 150,000
SDLT 0% on 125,000 2% on 25,000

I have researched a little and my understanding is:

Cash being paid for the other persons share 35.000
36% of the mortgage debt 82800
Total 117800
No SDLT

I have been looking at "How much is chargeable: Non-cash consideration: Assumption or release of a debt FA03/SCH4/PARA8"

FA03/SCH4/PARA8(1B) ensures that in determining the amount of debt assumed each person’s liability for the debt is taken to be a proportion of the debt corresponding to the share that they own in the property subject to the debt.

Example 2
A property is owned by V and P in 70:30 shares.
It is transferred to the sole ownership of P subject to a subsisting mortgage.
Assuming V is released from the debt or P agrees to indemnify V there is an assumption of debt by P.
P is treated as assuming debt equal to 70% of the amount owing.
This is because P is treated as owing 30% before the transfer and 100% after it.

and also:
https://www.legislation.gov.uk/ukpga/2003/14/schedule/4
(1B) the amount of secured debt assumed shall be determined as if the amount of that debt owed by each of those persons at a given time were the proportion of it corresponding to his undivided share of the property at that time.

Am I missing something?
Any help or advice greatly appreciated.
Thank you

AGoodman
Posts: 743
Joined: Fri May 16, 2014 3:47 pm

Re: Stamp Duty and Chargeable consideration

Postby AGoodman » Fri Feb 08, 2019 4:08 pm

based on these facts, your view sounds right to me

SDLT Geek
Posts: 153
Joined: Sun Apr 30, 2017 5:45 pm

Re: Stamp Duty and Chargeable consideration

Postby SDLT Geek » Fri Feb 08, 2019 5:38 pm

Agreed.

Haydon1
Posts: 3
Joined: Fri Feb 08, 2019 10:53 am

Re: Stamp Duty and Chargeable consideration

Postby Haydon1 » Fri Feb 08, 2019 10:17 pm

Thank you for your replies.
I have been in contact with HMRC twice today. One adviser informed me that as it is a joint mortgage regardless of unequal shares in the property chargeable consideration would be calculated on 50% of the mortgage! After more research and your replies I decided to telephone again and was informed that it would be based on “the proportion of the outstanding mortgage that belongs to the share of the property being transferred” as the guidance states on the HMRC website.
Not 50% then but 36%. So no SDLT due as total chargeable consideration is below the SDLT threshold.
I have now written to the Stamp Duty and Land Tax, HMRC in Birmingham to get this confirmed in writing.
Any more comments?
Thank you all

Haydon1
Posts: 3
Joined: Fri Feb 08, 2019 10:53 am

Re: Stamp Duty and Chargeable consideration

Postby Haydon1 » Fri Feb 22, 2019 1:44 pm

Hi
I have not yet received a reply form HMRC. However, I have been informed by the solicitor that as the transfer form when the property was originally purchased only stated at section 10 the shares of the property(64% 36%) and there was no declaration that referred to how the joint mortgage debt should be distributed then it would follow that the mortgage debt would be 50%/50% split when calculating Chargeable Consideration.
Can anyone explain what the information below actually means in particular "share of the property"? No mention of declaration regarding mortgage.

https://www.legislation.gov.uk/ukpga/2003/14/schedule/4
(1B) the amount of secured debt assumed shall be determined as if the amount of that debt owed by each of those persons at a given time were the proportion of it corresponding to his undivided share of the property at that time.

Should I just accept that stamp duty is due and I have totally misunderstood the guidance?

Thank you for all your help

SDLT Geek
Posts: 153
Joined: Sun Apr 30, 2017 5:45 pm

Re: Stamp Duty and Chargeable consideration

Postby SDLT Geek » Sat Feb 23, 2019 7:04 pm

The share of the property being transferred in your case is 36%, so the proportion of the mortgage to be taken as chargeable consideration is 36%. "The share of the property" means what it is says! It is the share in the property which needs considering, even if the parties had agreed between themselves to meet the mortgage in different proportions.


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