Stamp Duty and Chargeable consideration

[Haydon1]

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]

based on these facts, your view sounds right to me

[SDLT Geek]

Agreed.

[Haydon1]

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]

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]

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.

[Haydon1]

I would just like to give a BIG thank you to AGoodman and SDLT Geek for their replies to my question.
Without this site I would have just given in and believed what I was being told by "qualified advisors" and HMRC call centre, even though I was sure I was right.

It has taken sometime but I have finally received a refund from HMRC and a little bit of compensation from the conveyancing solicitor

"It always seems impossible until it's done"

[SDLT Geek]

Thanks for posting the update.

[berto2002]

Has anything changed in this space?

My conveyancer has just told me, "Even if Mrs X is only to own 20% in the property this does not affect the mortgage debt element. The percentage of equity is a matter of property ownership and just dictates how the proceeds would be split if the property were to be sold." This implies SDLT and surcharge payable on 50% of mortgage debt even if only transferring 20%.

I have pushed back using these links:

Stamp Duty Land Tax: transfer ownership of land or property - GOV.UK
The consideration is "the proportion of the outstanding mortgage that belongs to the share of the property being transferred"
https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property

Finance Act 2003
https://www.legislation.gov.uk/ukpga/2003/14/schedule/4
8.1 F9 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"

https://lawhive.co.uk/knowledge-hub/property/is-stamp-duty-payable-on-a-transfer-of-equity/
https://www.starckuberoi.co.uk/family-divorce/transfer-of-property-to-a-spouse/
https://www.samconveyancing.co.uk/news/conveyancing/transfer-of-equity-stamp-duty-8273

I have asked the conveyancer to validate my statement (this is for a BTL)

- House X will have a mortgage of £200,000
- My wife is NOT paying any cash for her equity transfer so only the mortgage could be relevant to stamp duty
- I am only transferring 20% of the house so she only takes 20% of the mortgage liability
- The Consideration for Stamp Duty is therefore 20% of £200,000 which is £40,000
- £40,000 is below the threshold for SDLT and the surcharge so no stamp duty is payable

Would welcome any comments or references.

[someone]

Nothing has changed. The relevant law is FA 2003 S4 p8

(1B)Where in a case in which sub-paragraph (1)(b) applies—

(a)the debt assumed is or includes debt secured on the property forming the subject-matter of the transaction, and

(b)immediately before the transaction there were two or more persons each holding an undivided share of that property, or there are two or more such persons immediately afterwards,

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.


It is deemed in law, that the share of the debt is in proportion to the share of the property ownership. This overrides any other agreements. In particular, mortgages are jointly and severally liable which means one person is liable for all of it if the other can't or won't pay but that doesn't matter for SDLT calculations.