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Where Taxpayers and Advisers Meet

SDLT payable when being added to partner's deeds?

Hello Paul
Posts:3
Joined:Tue Jan 11, 2022 12:40 pm
SDLT payable when being added to partner's deeds?

Postby Hello Paul » Tue Jan 11, 2022 12:53 pm

Hello,
I will shortly be added to my partner's deeds on her ~£450,000 (owned outright, no mortgage) house. This is because we will soon be raising a mortgage (£270,000, all approved) on the house to finance a separate property project. We will both be jointly and equally responsible for paying the mortgage, and we must both be on the deeds to the house (for the mortgage to happen).

I have read all kinds of conflicting information on whether/how much stamp duty must be paid when doing a transfer of equity, and for no good reason whatsoever, the amount payable seems to be dependent on how large a mortgage there is on the property - and this figure seems to be directly or inversely proportional to the mortgage (depending on what information I believe). I will pay my partner half the value of her house (~£225,000) when I'm added to the deeds. From looking at HMRC's website, the larger the mortgage, the more SDLT is payable - which seems ludicrous. Or maybe I've interpreted that completely wrong.

We are not married nor in a civil partnership.

So my question is:
Would it be better to add me to the deeds before the mortgage is in place or after?

Thanks in advance for any help or suggestions!

AGoodman
Posts:1418
Joined:Fri May 16, 2014 3:47 pm

Re: SDLT payable when being added to partner's deeds?

Postby AGoodman » Thu Jan 13, 2022 11:21 am

The mortgage is irrelevant - the provisions you have seen apply when the mortgage is already on the property at the time of the transfer. Here, you appear to be paying £225k so you pay SDLT on £225k.

Hello Paul
Posts:3
Joined:Tue Jan 11, 2022 12:40 pm

Re: SDLT payable when being added to partner's deeds?

Postby Hello Paul » Thu Jan 13, 2022 12:28 pm

Thanks for your reply, @AGoodman. Logic would dictate that a mortgage would have no bearing on the SDLT, but from my research online, (including HMRC's own information), a mortgage does, for no good reason, seem to have be relevant (unless I've got this all wrong):

From a random website (https://www.quittance.co.uk/conveyancing/advice/transfer-of-equity/do-i-pay-stamp-duty-land-tax-sdlt-on-a-transfer-of-equity):
David owns a property worth £600,000 and is mortgage-free.
David and Sheila get married and David gives 50% ownership of the property to Sheila. As there is no mortgage, there is no 'chargeable consideration' and therefore no SDLT is payable.
However, if in the above example, David has an outstanding mortgage of £400,000, Sheila will have to pay Stamp Duty on £200,000 (£400,000/2 = £200,000) - this being the 'Chargeable Consideration')
Stamp Duty is only payable on the mortgaged part of the property. If the property is wholly owned then no Stamp Duty is payable.


From HMRC (https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property):
Example 2 – you pay SDLT even though no money changes hands
The owner of a property valued at £500,000 with an outstanding mortgage of £400,000 transfers half the property to their partner when they marry in March 2020. Their partner takes on 50% of the mortgage (£200,000).
HMRC charge SDLT on the amount paid for a property or the amount of ‘consideration’ given.
By taking liability for the mortgage, the owner’s partner has given ‘consideration’ of £200,000 for their share of the property which is £1,500 SDLT (0% of £125,000 + 2% of £75,000).
They must pay SDLT on that amount and tell HMRC about the transfer by filling in an SDLT return.
The equity is not included in the calculation as you only pay SDLT on the consideration given.


...and from https://www.moneyhelper.org.uk/en/homes/buying-a-home/stamp-duty-land-tax-transfer-ownership-land-property-england-northern-ireland :
The owner of a property worth £500,000, with an outstanding mortgage of £400,000, gets married.
They transfer half of the property to their partner, who takes on responsibility for half of the mortgage.
The person receiving the transfer has a chargeable consideration of £200,000, which is over the SDLT threshold.
The new owner will have an SDLT liability of £1,500 (0% of £125,000 and 2% of £75,000).


Seems like a lot of nonsense, right?!

AGoodman
Posts:1418
Joined:Fri May 16, 2014 3:47 pm

Re: SDLT payable when being added to partner's deeds?

Postby AGoodman » Fri Jan 14, 2022 2:12 pm

None of those examples contradict what I said. The mortgage is only relevant to SDLT where it is a pre-existing mortgage and the transferee takes on the obligation to pay.

This is based on the law rather than examples but in any case, the first example contains the answer: "David gives 50% ownership of the property to Sheila. As there is no mortgage, there is no 'chargeable consideration' and therefore no SDLT is payable."

AGoodman
Posts:1418
Joined:Fri May 16, 2014 3:47 pm

Re: SDLT payable when being added to partner's deeds?

Postby AGoodman » Fri Jan 14, 2022 2:13 pm

In your case, you are actually paying £225k so the SDLT is calculated on that

bd6759
Posts:3745
Joined:Sat Feb 01, 2014 3:26 pm

Re: SDLT payable when being added to partner's deeds?

Postby bd6759 » Mon Jan 17, 2022 2:05 am

I will pay my partner half the value of her house (~£225,000) when I'm added to the deeds.
If you are paying £225,000 for a share, SDLT will be based on that.

Hello Paul
Posts:3
Joined:Tue Jan 11, 2022 12:40 pm

Re: SDLT payable when being added to partner's deeds?

Postby Hello Paul » Mon Jan 17, 2022 5:26 pm

Thanks for all the helpful replies!
Another question:
As I mentioned, the purpose of adding me to the deeds is to raise a mortgage on her ("our") house for which we will be jointly responsible. I am getting confusing messages from the solicitor (who is very slow to respond) appointed by the mortgage company regarding the release of the mortgage funds. Which situation do you think is most likely to be the case:
1. The mortgage company insists that I am added, via the Land Registry, to the house's deeds before they'll release the money.
or
2. The mortgage company will release the money (the mortgage is all agreed - not just "in principle") before the Land Registry has added me to the deeds.
Any thoughts, anyone, please?

AGoodman
Posts:1418
Joined:Fri May 16, 2014 3:47 pm

Re: SDLT payable when being added to partner's deeds?

Postby AGoodman » Fri Jan 21, 2022 11:21 am

not a conveyancer but almost certainly option 1. Otherwise you would never be able to buy a house using a mortgage because the buyer is not the registered owner until much later (when the Land Registry have processed it)


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