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Where Taxpayers and Advisers Meet

SDLT for transfer of interest to spouse

mudassiraslam
Posts:3
Joined:Tue Dec 17, 2019 3:19 pm
SDLT for transfer of interest to spouse

Postby mudassiraslam » Tue Dec 17, 2019 3:42 pm

Hi,

I and my wife (not working) got married in 2008 and we bought a house in 2009 for £245k on which £160k is the outstanding mortgage. The house and the mortgage is 100% in my name. The mortgage is an HSBC Amanah (Islamic finance) product.

Current value of the property is £500k and we are in process of remortgaging the house and withdrawing some equity to buy a new house. We will put the existing house up for rent. For tax purposes, I was planning to transfer 99% interest in this house to my wife at nil cash consideration.

My questions are:

1. I understand that SDLT will be payable on this transfer. However will it be calculated using: A) on Market Value (£500k); or B) on the old mortgage outstanding amount (i.e. £160k) or C) new outstanding mortgage amount after we have remortaged the house (£375k). I understand that remortage and transfer of title will happen simultaneously but I am not sure legally when exactly the transfer of title occurs i.e. after the remortgaged or before the remortgage transaction?

2. Will the above transfer of interest attract capital gains tax?

3. Is there any alternate better way to plan this transaction from tax perspective? I am a high tax payer and my wife currently is not working so the main purpose is to limit the tax bill on the future rental income.

thanks for your help.

jerome.lane
Posts:237
Joined:Mon Aug 12, 2019 8:41 am
Location:Sandhurst, Berkshire
Contact:

Re: SDLT for transfer of interest to spouse

Postby jerome.lane » Wed Dec 18, 2019 10:21 am

You say "we bought" and "is 100% in my name". This leads to whether the property was actually bought jointly or by you. Beneficial and legal ownership are separate concepts. However, SDLT will be calculated on the deemed consideration which is looking like 99% of the mortgage of £375k. If the house has always been your home, then no CGT. If With the changes in CGT rules coming into effect in March, you might want to think about transferring the property into a limited company while you should only have SDLT to pay and then can tax efficiently manage the profit generated. Possibly the easiest thing to do if possible is just give the property to your wife before you remortgage in her name. The SDLT will then be on £80k (so nil to pay) but the issue will be if your wife can get the finance with no income in her name. you should probably take advice on the best way to structure this.
Jerome Lane
Tax Adviser
Telephone: 07943 005902

mudassiraslam
Posts:3
Joined:Tue Dec 17, 2019 3:19 pm

Re: SDLT for transfer of interest to spouse

Postby mudassiraslam » Wed Dec 18, 2019 10:52 am

Jerome,

Many thanks. Probably best way is to transfer the interest to my wife before the remortgage. The problem however is that it is HSBC's Amanah's finance where the property is in the name of HSBC Trust who has leased it to me.

I agree with you that probably I need to sought a proper tax advice on this.

thanks
Mudassir

someone
Posts:691
Joined:Mon Feb 13, 2017 10:09 am

Re: SDLT for transfer of interest to spouse

Postby someone » Thu Dec 19, 2019 8:07 am

If you do the transfer of equity and the remortgage in one go then the SDLT is calculated on the original mortgage.

The mortgagee will give you a new mortgage account on the transfer of equity even if the borrowed amount and the term doesn't change. So it's obvious whether you did it as one or two transactions.

If it's all done as one transaction it's as if you did the transfer and then increased the mortgage. I believe this is what has to happen legally anyway - you cannot give to your spouse until the mortgagee releases their interest and the mortgagee cannot have a new interest in the jointly owned property without your spouses consent.

It's one of the reasons solicitors have to be used for trivial transactions like this - there's a (very) short window of time where the bank depends on the transaction completing. The solicitor guarantees to the bank that all the paperwork is in place and all the parts will complete.

Jerome_Lane
Posts:25
Joined:Mon Jul 22, 2019 10:13 am
Location:Camberley, Surrey
Contact:

Re: SDLT for transfer of interest to spouse

Postby Jerome_Lane » Thu Dec 19, 2019 10:01 am

In these circumstances, only a properly documented gift and declaration of Trust of the Lease should suffice ahead of the refinance. Although the bank's finance terms and conditions may possibly be breached for an miniscule period of time, they should not lose their equitable charge over the property and no foul play or mischief should be called. I personally do not see the point of getting the bank involved for something that doesn't fetter their equitable interest unless the existing terms are draconianly overbearing.
Jerome Lane
Tax Advisor
jerome.lane@stewartco.co.uk
Stewart&Co.
Chartered Accountants
Telephone: 01276 61203

mudassiraslam
Posts:3
Joined:Tue Dec 17, 2019 3:19 pm

Re: SDLT for transfer of interest to spouse

Postby mudassiraslam » Mon Dec 23, 2019 4:32 pm

Thanks both.

Someone - I have sent you a PM to discuss it a bit further - thanks


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