Gift transfer of a property and stamp duty charges?

by Readers Question

11 months ago

Gift transfer of a property and stamp duty charges?

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Gift transfer of a property and stamp duty charges?

I have recently bought my first property (in Oct 16) for £50,000 with the intention of buy to let.

I have seen another house that I want to buy to let and want to give the house I bought in Oct to my sis in law as a gift. My sis in law already has 2 buy to let properties on her name and adding the Oct purchase would make it 3. Which would leave me with only one that I am considering buying.

There are no mortgages involved in any of the properties (me or my sis in law).

What are Stamp Duty implications for me and my sister?

My understanding is I would pay stamp duty at 3% on the new purchase, but should be able to reclaim once I have transferred the property to my sister in law.

Sis in law implication: My understanding is that because she is receiving a gift she wouldn’t pay stamp duty even thought this would be her 3rd property.

Can you please help and confirm.

Adam

Comments

Neil Patterson

11 months ago

Hi Adam,

You will need to ask HMRC and or your solicitor this question directly as it could be seen as trying to avoid Stamp Duty.

The question would be why would you buy a property and gift it to your Sister-in-Law.

This scenario is not covered in the .Gov HMRC guidance so be careful and make sure you ask the questions without omitting any information.

>> https://www.gov.uk/stamp-duty-land-tax/residential-property-rates

John Constant

10 months ago

Your first line contains the phrase "........with the intention to Buy to Let".
I assume that by now you have let the property. Therefore, it is not your residential property. Once you have bought the second property, which is also BTL (by your own admission), you will not qualify for relief using the flow diagram above because you are not replacing your residential property.
You seem to be flush enough to be able to gift a property to your sister......so pay the tax, which is relatively small in comparison.

Paul Shears

10 months ago

I am aware of someone who was in a similar position some years ago.
They effectively sold the property for a below market fee to the person that they wanted to benefit from it.
I asked my accountant for his views on this.
He told me that the inland revenue have no authority to dictate the value of anything.
I recall that BMW years ago utilised the same rule in supplying their staff with cars at a tiny fraction of their true value.
I also know of someone who purchased a car from Lloyd's of London many years ago utilising the same rule.
Clearly this reduces any tax payable, but I am uncertain how this stands up in today's tax laws.

Badger

10 months ago

"He told me that the inland revenue have no authority to dictate the value of anything."

Hmmm... very interesting.

And yet we are beset on all sides with dire warnings about what HMRC will 'deem' to have taken place with respect to the value of any given transaction for tax purposes.

Various accountants have advised me in the past about the dangers of contemplating asset transfers at less than full market value.

I wonder where the truth actually lies in practice?

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