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CGT and SDLT Implications on exchange of premises

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Person A, non-uk resident, owns a commercial shop worth £240,000.

Person B, uk resident, owns a residential house worth £250,000.

A and B wish to exchange premises with each other. Both are unconnected parties. No cash consideration will be given, it will be a straight forward swap.

From what I understand, if they swap premises with each other, A will not pay any CGT as non-uk resident and nor will B pay any CGT as he purchased property some months ago and capital value has not increased.

Regarding SDLT, A will not pay any SDLT as currently there is a SDLT holiday for residential property. 

My question is will B have to pay SDLT on the shop as it is a commercial property even though no consideration is being transferred?

Is it a possibility that they both just gift the respective property to each other and therefore no SDLT on the gifts? or are they rules that prevent this?

Any help would be much appreciated.

Replies (9)

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By Tax Dragon
09th Mar 2021 18:44

Taxain wrote:

Is it a possibility that they both just gift the respective property to each other and therefore no SDLT on the gifts?

Are you advising one of these parties? B, perhaps, the UK resident?

What'll you do if, on your suggestion, B gifts property to A in anticipation of receiving a generous gift from A, and A makes no such gift? I'd guess B will then sue you. I would, in their shoes. Will your PII rescue you?

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Replying to Tax Dragon:
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By Taxain
10th Mar 2021 13:19

I appreciate your concern, however in the given scenario, it would be highly unlikely that one party would defraud the other.

I Just wanted to know if this was a possibility or there is some legislation that disallows this.

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Replying to Taxain:
Psycho
By Wilson Philips
10th Mar 2021 14:00

I'm not aware of any specific legislation. But good luck in convincing HMRC that a gift of one property coinciding with the gift of another property from the donee is not an exchange.

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Replying to Taxain:
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By Tax Dragon
10th Mar 2021 17:09

Taxain wrote:

I appreciate your concern, however in the given scenario, it would be highly unlikely that one party would defraud the other.

Defraud is a revealing choice of word. Can X defraud (unconnected) Y by failing to make them a gift? Any fraud here would be against HMRC by pretending that the transfers were gifts, when quite clearly they are not.

You don't need legislation that deems something to be what it already is.

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Psycho
By Wilson Philips
09th Mar 2021 19:39

Are they planning to swap before 1 April?

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Replying to Wilson Philips:
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By Taxain
10th Mar 2021 13:14

Possibly but both are not in a hurry to exchange so can delay to after 1 Apr

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Replying to Taxain:
Psycho
By Wilson Philips
10th Mar 2021 13:55

Delay and they risk a(n increased) SDLT charge.

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By frankfx
09th Mar 2021 20:33

Land transactions in writing.

Conveyancing lawyers , both parties, would be a good knowledge source.

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Hallerud at Easter
By DJKL
10th Mar 2021 13:59

Excambion deals do have consideration, the property received is likely consideration, what else can it be?

Here is the Scottish guidance re LBTT re same, I suspect your SDLT is similar.

https://revenue.scot/land-buildings-transaction-tax/guidance/lbtt-legisl...

Re gifts, no self respecting solicitor would countenance

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