SDLT/Transfer Of Equity

I have a question regarding stamp duty and transfer of equity. I currently own a property with a friend. I am buying him out and my partner is being put onto the mortgage. I'm really struggling to figure out the stamp duty implications if any.

The property is worth £475,000 with an outstanding mortgage of £200,000. I am paying my friend £50,000 to buy him out. I'm assuming that my partner's 'consideration' will be £100,000, half the outstanding mortgage, and therefore no stamp duty will apply. However, I have read that in some cases any money paid to an owner for the purposes of buying them out will be factored into the calculation.

Can anyone shed any light?

Thanks in advance :)

9 Answers

Hi,

The consideration is the payment received by the outgoing owner in money or money's worth, so in this case it will be half the outstanding mortgage debt plus the £50,000 therefore the duty will be based on a total consideration of £150,000 and will be £500 UNLESS this is a "Higher Rate Transaction", which it will be if your partner currently owns another property. If it is a Higher Rate Transaction the duty will be £5,000.

Probably not what you wanted to hear but I hope this helps.

Best regards

Hi there,

Thanks for your response, not quite what I wanted to hear but I thought this might be the case!

At the moment we're working things out on the basis of my partner being a joint tenant. I'm wondering if we go down the tenants in common route with me owning 70% and her the remaining 30% if this will help us avoid any stamp duty? On this basis her consideration would be the £50,000 paid to my friend plus the 30% outstanding mortgage debt of £60,000 which will bring her consideration down to £110,000 in total. Not sure if her owning another property would still result in stamp duty being owed in this scenario?

Really appreciate your advice

Phil

Unlike standard rate transactions there is no 0% bracket for higher rate transactions so bringing the consideration down below £125,000 would not avoid duty. If your partner owns another property there will be duty payable and it will be 3% of the consideration paid. As to whether you could apportion the consideration between the two of you, this is a grey area. Potentially you could but I think most conveyancers, particularly if you are taking a new mortgage (in which case they have to undertake to the lender that the stamp duty will be paid) would want to err on the side of caution and would insist that the full duty is paid and that you appeal any overpayment you think you've made after completion. You could consider getting an opinion from a solicitor or barrister specialising in tax law though this may be prohibitively expensive.

Thanks for your comments, very helpful. Looks like we'll have to swallow it!

Hi there,

I wonder if you might know the answer to this also. When I bought the property with my friend we had a deed of trust written up. This stated that should we sell the property, I would receive 20% (the deposit I paid) and the remainder would be split 50/50. We've agreed on a £50K figure to buy him out that over writes this.

However, when working out my ownership of the property and what percentage is left when my partner comes onto the mortgage would I apply the same formula to the outstanding mortgage debt of £200K?

Previously I had worked on the basis that I owned 50% and my partner would own 50% (£100K) when she comes onto the mortgage but given the way the ownership was structured when we bought I'm not certain this is correct?

Any insight would be greatly appreciated

Regards

The shares in which you held the property previously are not relevant to how you now hold it with your partner. If you want the shares you each have to reflect your contributions then you need to work out what percentage your partner is contributing. So if her contribution is to take on responsibility for the mortgage with you, effectively therefore paying half the mortgage debt, what is half the mortgage debt as a percentage of the total value of the property.

So regardless of how the property was previously split between my friend and I, if my partner and I opt for tenants in common with myself owning 85% and her owning 15% there won't be any stamp duty liability for me as I'll be owning more of the property than I was before?

I understand that in this scenario stamp duty would be charged at 3% for her 15% share plus what we pay my friend.

It isn't a given that the shared in which you hold the property as between yourselves if reflected in the way that stamp duty is calculated. You ought to check this out with HMRC before proceeding.

Hello

HELP! I brought a property with my mother over 10 years ago. I want to re-mortgage but take my mother off the mortgage. My mother is 78. My mother doesn't want any money and wants to transfer the property to me. I have been told I am liable for stamp duty.

The property is worth £525,000, the outstanding mortgage is £198,000 and I plan to borrow an additional £181,000.

I own 6 other properties. How much am I liable to pay?. I'm so confused and wished I had taken her name off before the new rules.

I would appreciate your help!