Changing beneficial interest

Changing beneficial interest

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I have a client who owns a buy to let property and is about to put it on the market.  He has never lived in the property and there is a small mortgage

He wishes to gift 50% of the property to his wife so she can claim the Capital Gains Tax Annual Exemption.  I assume change of benefical interest would suffice through a declaration of trust rather than changing the ownership deeds.

 

 

 

Replies (8)

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Portia profile image
By Portia Nina Levin
18th Jan 2017 10:31

Yes, but there will be SDLT on half of the mortgage.

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Replying to Portia Nina Levin:
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By tjw
18th Jan 2017 12:01

Isn't that only if the wife becomes liable to pay the mortgage? If she takes on no liability then there's no consideration.

The bigger problem is likely to be that the mortgage requires that no beneficial interest is transferred without the mortgagee's permission. Don't know if ignoring that might render the declaration of trust invalid or just unenforceable if the mortgagee tried to repossess the property.

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Replying to tjw:
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By Portia Nina Levin
18th Jan 2017 12:14

I can confirm that you do not know what you are talking about.

In relation to the SDLT point (and, of course, assuming that the property is in the UK but not in Scotland), FA 2003, Schedule 4, paragraph 8 refers.

In relation to the legal point, it is an established principle that a man cannot give what he does not have - and, therefore, can only give what he does have - with the effect that, as a matter of property law, the husband can only give his wife a share of the already encumbered property.

The mortgage conditions will be the mortgage conditions, but they are generally silent on such matters, rather than making the condition that you suggest explicit, and so it does not trouble most lawyers.

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Replying to Portia Nina Levin:
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By tjw
18th Jan 2017 13:58

Fair enough.

I had assumed http://www.legislation.gov.uk/ukpga/2004/12/section/301#section-301-3 would mean that there was no chargeable consideration.

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Replying to tjw:
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By Portia Nina Levin
18th Jan 2017 14:08

Why would you assume that? Have you been talking to Justin Bryant?

Perhaps you are Justin, and have set up another account in order to find yet another way of making a complete [***] out of yourself?

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Replying to Portia Nina Levin:
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By tjw
18th Jan 2017 14:41

No, I'm not Justin Bryant. I have no idea who he is.

I assumed it because it says:

where
... and
(1b) the rights or liabilities in relation to that debt of any party to the transaction are changed as a result of or in connection with the transaction,

then for the purposes of this paragraph there is an assumption of that debt by the purchaser

I'm not trying to argue with you. I'll accept that your answer is correct. I had thought (obviously incorrectly) that the wife didn't necessarily have to become liable for the debt and so (1b) would mean that there was no consideration.

As I appear to have stepped into a topic that has obviously been thrashed out before with considerable heat, I'll step out at this point.

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By MBK
18th Jan 2017 13:09

Waiting now for KB to come on and tell us all that the SDLT can be circumvented by those in the know!

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By Portia Nina Levin
18th Jan 2017 13:15

I think you mean JB MBK.

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