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Where Taxpayers and Advisers Meet

SDLT on transfer of equity

mat5664
Posts:3
Joined:Sun Aug 15, 2021 5:08 pm
SDLT on transfer of equity

Postby mat5664 » Sun Aug 15, 2021 5:19 pm

My partner and I are currently selling our respective houses so we can move in together. We had both accepted offers on our houses and had an offer accepted on a new build house which completes next month. However, my Partner’s sale has fallen through and to ensure we don’t lose our new house, I have had to take a mortgage to make up the difference while she resells.

As my partner is retired, I have had to take the mortgage in my own name and therefore the house purchase will also be in my own name as the bank does not allow otherwise (if it wasn't for that, we could have put in in joint names and reclaimed the 2nd home tax when she sold).

As a result, does this mean that when my partner sells and she uses the funds to repay the mortgage, which could be pretty soon after we move in, we will have to pay SDLT on the amount of the mortgage she repays to transfer the house into both our names? Can she just gift me the money to repay the mortgage (I am guessing not).

Any advice/clarification much appreciated.

someone
Posts:521
Joined:Mon Feb 13, 2017 10:09 am

Re: SDLT on transfer of equity

Postby someone » Mon Aug 16, 2021 11:09 am

It might be possible to create a DoT at the time of purchase that gives your partner 50%. The only problem is that it might be against the terms of your mortgage and therefore your solicitors might refuse to do it. But if you do make it 50/50 via a DoT then the change to joint names doesn't involve any transfer of equity (even though that's what the mortgage company will call it) and so there is no SDLT.

Technically, if you do create a DoT then I believe there is a requirement to attach a form A restriction. (and I believe there is some date in the not too distant future where you will have to register the DoT with HMRC if you haven't already converted to joint names)

Another possibility might be to explicitly document in a letter to your partner that the property is owned 50/50 from the date of purchase. I'm not 100% sure that a letter is allowed to document land and property.

Unfortunately, this is one of those problems that has both legal and tax effects and your solicitors won't advise on the tax side and an accountant won't advise on the legal side. I'd first suggest talking to your solicitors as to how you can achieve a 50/50 beneficial ownership from purchase.

The other thing to be aware of is that if your partner owns part of the property then I think the higher rate of SDLT will be due and it's not 100% obvious to me that it is reclaimable when your partner sells their property because there's no single transaction that triggers a reclaim. SDLTgeek might know better if he sees this.

How much is the mortgage for? if it's less than 250K then I don't think you need to worry about SDLT on the transfer of equity anyway as your partner will only take on 50% of the debt when the transfer happens.

mat5664
Posts:3
Joined:Sun Aug 15, 2021 5:08 pm

Re: SDLT on transfer of equity

Postby mat5664 » Mon Aug 16, 2021 11:51 am

thank you.

The mortgage is £430k so 50% of it would be subject to SDLT.

Just found out we are completing 1 Sept - as it's a new build you only get 2 weeks notice, so that does not leave much time for anything, especially as our solicitor is now on leave until end August.

someone
Posts:521
Joined:Mon Feb 13, 2017 10:09 am

Re: SDLT on transfer of equity

Postby someone » Mon Aug 16, 2021 2:27 pm

I think your only other option is to find an accountant and get paid for advice given the time scales. The problem is that your solicitors might refuse to do something that the accountant advises without confirming with the mortgage company first - which could then delay things.

I'd be very wary of accidentally triggering the 3% extra charge that you cannot get back in order to save something like 2K when you transfer 50% by trying to DIY something at this late stage!

mat5664
Posts:3
Joined:Sun Aug 15, 2021 5:08 pm

Re: SDLT on transfer of equity

Postby mat5664 » Fri Aug 20, 2021 4:22 pm

actually I got that wrong. She would pay off the whole mortgage amount so SDLT would be payable on £430k - which is a fairly sizeable amount. (£11,500 after end Sept)

someone
Posts:521
Joined:Mon Feb 13, 2017 10:09 am

Re: SDLT on transfer of equity

Postby someone » Fri Aug 20, 2021 10:43 pm

I'm musing aloud and probably one of the accountants here will be along to correct me but:

If you transfer into joint names first but dont pay off the mortgage then the sdlt will be on half the mortgage.

If she then pays off the whole mortgage then no more SDLT (or she can give you the money to pay off your share of the mortgage)

I think the only requirement will be that the transfer to joint names is not contingent on her agreeing to pay off the mortgage (or give you money)


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