SDLT calculation – transfer of equity with simultaneous remortgage (partner added 50/50)

[slonger100]

Hi all,
I’m reposting this here for a wider perspective — I know some of the same people are active on this forum, so to avoid repetition I’ve included all the details up front.

Facts:
• Property currently in my sole name, bought ~1 year ago as our family home.
• Value: £365,000
• Existing mortgage: £172,000 (sole name)
• We’re remortgaging to clear that debt and adding my partner as a 50/50 tenant in common.
• She’s paying £110,000 cash (from the sale of her previous main residence) and we’ll take a new joint mortgage of £62,000. We are changing from HSBC to Halifax so a totally new mortgage.
• We’ll both pay the new loan equally via our joint account.
Originally, she couldn’t be on the purchase as she still owned another property as did I and lenders wouldn’t permit three residential mortgages. I paid the full deposit, SDLT and mortgage myself. we have both since sold our previous main properties so going forward this will be our main residence. We do both own btl properties, as we sold both our main residence properties the solicitor says we don't need to pay the higher rate stamp duty.

Solicitor’s view:
£86,000 (half the old £172,000 mortgage) + £110,000 = £196,000 consideration.
My view:
£110,000 cash + £31,000 (half of new £62,000 mortgage) = £141,000 consideration.

Key points already covered elsewhere:
• The solicitor appears to be applying FA 2003 Sch 4 para 8 (“assumption of existing debt”) per HMRC SDLTM04040A.
• But the old mortgage is being redeemed, so arguably there’s no existing debt assumed.
• HMRC SDLTM04040 suggests the chargeable consideration should be the cash paid + share of new borrowing.
• My partner’s getting a 50% share worth ~£182,500 for £141,000 — the rest being a gift.
• I was the sole beneficial owner throughout; she didn’t fund the original purchase.

Questions:
1. Does the solicitor’s £196k figure misapply the assumption-of-debt rule?
2. The solicitor is not willing to discuss the matter any further until after completion what options do I have?

Any professional insight or HMRC examples confirming the correct treatment would be much appreciated.
Thanks,

[someone]

The solicitor is double counting. They are correct that it's half of the original mortgage that matters but they're then applying the 110K incorrectly.

Your partner assumes 86K of the (original) debt from you - so that is consideration paid to you.
Your partner pays off all but 31K of *your* remaining debt - so that is consideration of 55K paid to you.

Total consideration paid to you is 86+55 = 141K (as you calculated via an alternative route)

Your partner also pays off 55K of their own assumed debt - that is not consideration as you get no benefit from it.

[someone]

On the SDLT return, it's your responsibility to submit it correctly, not theirs, so they're foolish to refuse to discuss it further until completion as they cannot submit it with figures you disagree with.

You can submit it yourself:

https://www.gov.uk/guidance/stamp-duty-land-tax-online-and-paper-returns

Note that it's required to be submitted within 14 days of completion.

[AGoodman]

Yes, the solicitor is wrong.

I'd phrase it this way, that the solicitor may understand: your partner's consideration is:

1. Cash of £110,000 that she will be paying to you (you will then pay all/most of it to the bank but this is irrelevant)
2. Assuming debt of half the new mortgage - £31k

At no point is your partner assuming half of the current debt. That is, and always remains, between you and the current lender.

[someone]

Yes, the solicitor is wrong.

I'd phrase it this way, that the solicitor may understand: your partner's consideration is:

1. Cash of £110,000 that she will be paying to you (you will then pay all/most of it to the bank but this is irrelevant)
2. Assuming debt of half the new mortgage - £31k

At no point is your partner assuming half of the current debt. That is, and always remains, between you and the current lender.

This give the right answer in this case because all of the 110K is being used to redeem the debt and there's no new debt being added but isn't how it has to be calculated and trying to calculate it based on the new debt fails when the loan is extended (even in the OPs case there might be fees being added to the new loan, it is the old loan at the date of redemption that matters although the difference if it's only bank fees being added will be tiny)

You could word it as "cash of 110K that she pays to you and you use to part redeem the mortgage leaving 62K outstanding plus half of this remaining outstanding amount". The solicitor is correct that the calculation references the original mortgage, not the new mortgage. The problem with wording it this way is that there's at least an argument that if the partner pays 110K to the OP then the consideration is indeed 196K, the OP is then making a gift back to the partner by way of reducing the partners liability unless the payment to the OP is conditional on the OP using it to reduce the partner's liability.

Had they, for example, been doing the same calculation but additionally adding 200K to the (new) loan in order to take a year off on a round the world cruise, the calculation remains half of the original debt plus the amount of (non debt) consideration paid to the OP.

At the end of the transaction with an extended mortgage, the debt would be 131K per person but the consideration should still be 141K

[someone]

8(1)Where the chargeable consideration for a land transaction consists in whole or in part of—

(a)the satisfaction or release of debt due to the purchaser or owed by the vendor, or

(b)the assumption of existing debt by the purchaser,

the amount of debt satisfied, released or assumed shall be taken to be the whole or, as the case may be, part of the chargeable consideration for the transaction.


Just for completeness, 8(2) limits the consideration to the market value which would limit the consideration to a maximum of 182500 based on the OPs figures.