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SDLT - avoiding when redistributing joint property

SDLT on jointly owned 2nd mortgaged property when altering shares

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I jointly own a 2nd home as a BTL property with an uncle. We wish to redistribute the ownership so only I own the property. This will be by him gifting me his share. I have never lived in the BTL and cannot do so in future. 

The £400k property is mortgaged for £220k - ie the uncle's mortgaged share is £110k which is effectively being gifted to me. Mortgage company are happy with this in principle (and with uncle coming off it).

As I see it, £110k mortgaged share coming to me as a gift = stamp duty at 3% on this "consideration" as this is a second home. 

The reason this feels bizarre is because I start off with the same number (and address) of homes as I end up with, albeit a larger share. 

Whereas if I only had one home, I'd have no SDLT to pay as it's below £150k. 

Is that right? Seems bizarre to pay stamp duty on the mortgage amount when we intially both paid stamp duty together on the whole property amount. 

We find it odd to pay tax twice on a property we own when we are just swapping around how much we own of it. Any way (other than paying off mortgage) to reduce this please? Thanks very much. 

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27th Feb 2019 22:03

Where you are confusing yourself is the use of terms such as “redistributing”, “gifting” and “swapping around”. You are doing none of that.

You don’t own 2 properties, you effectively own 1 1/2 properties. You are acquiring an additional interest in a property, being your uncle’s half-share, and are effectively paying him consideration for it. On the face of it, therefore, the SDLT charge sticks - unless someone else here has a solution for you.

It might seem illogical or unfair - welcome to the world of tax!

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to Wilson Philips
27th Feb 2019 22:52

Thanks. I see your point. Ahh well.

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27th Feb 2019 23:06

Wait. I'm a bit confused by this:

"If the larger share is given outright as a gift. If you take a bigger share but don't pay anything in return, there's no 'consideration' given including taking on liability for a mortgage. You won't pay SDLT , even if the value of the extra part of the share is more than the SDLT threshold."

If a joint owner gives their 50% (incl mortgaged bit) to the other as an "outright gift", does that mean nothing is due?

Or is that only case if the person gifting their share still remains on the mortgage jointly but does not own the property anymore? I find this paragraph clunkey to read. Grateful for any help understand it.

Thanks

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to thelungdoctor
28th Feb 2019 06:46

"The extra part of the share" is talking about joint ownership. You and your uncle will no longer have joint ownership, so this doesn't apply.

This being Accountingweb, some bright spark will no doubt be along to suggest a 99/1 split. That's joint, they'll say, the no SDLT rule might apply.

You and your uncle might very well want to take advice before contemplating any such notions. You might be better off paying the SDLT.

If i may add... this is one problem with relying on free-for-all forums. Answers you get seldom think 'in the round'. They're not holistic. Asking in here is no substitute for sitting down with an advisor. It may seem cheaper, but again, perhaps not if you think holistically.

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to thelungdoctor
28th Feb 2019 09:35

You are confused because the Gov.UK text is extremely poorly drafted and incorrectly punctuated - you would have been better off looking at the underlying legislation.

What the guidance ought to read is something like:

"If the larger share is given outright as a gift, ie if you take a bigger share but don't pay anything in return, so that there's no 'consideration' given (which consideration may include taking on liability for a mortgage), then you won't pay SDLT ... "

In any event, if you read further down the guidance you will find an example that fits nicely with your circumstances (confirming that SDLT would be payable).

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