SDLT on beneficial transfer to spouse – No mortgage – Want To Utilise Both CGT Annual Exemption Allowances on Sale

SDLT on beneficial transfer to spouse – No mortgage – Want To Utilise Both CGT Annual Exemption Allowances on Sale

6:41 AM, 8th June 2017, About 5 years ago 15

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I’ve been looking at whats been said on this already and I’m a bit confused. Let me describe my scenario.

My wife has a property, gifted to her in her name, bought a couple of years ago for £285k. She now wants to sell. Its value is £320k. We have other rental properties owned jointly and are both higher rate taxpayers. Neither of us have used our CGT allowance.

There is no mortgage. The property is in her sole name. If she sold it outright, the gain would be £35k – the CGT allowance of £11.5k = £23.5K total gain on which she would pay 28% CGT as I understand it, which equates to £6.58k

Here’s the question: Could she transfer, for example, by benefical gift, half of the property to me (value of £160k). My understanding is that there is no CGT on transfer between spouses.

However is there any SDLT to pay. One article I have just been reading on this forum says there is no SDLT to pay. Another article seems to suggest there is (due to transfer of assets, by gift or whatever).

Would this be the best way of doing it, we are in the process of selling the property now, so we were thinking of beneficial transfer of 50% of the value to me (of course – no mortgage on the property): hence

Property therefore now in joint names, Total gain as before, being £35k – 2 CGT allowance (£23k) = joint gain now of £12k. Hence CGT payable by each of us is 28% of this which is £3.36k each.

In addition I have some EIS investments which would allow me to defer the £3.36k payable for3 years anyway.

The question, here is, do we have SDLT to pay and if so would it be better to
1) Dispose of the property in my wife’s name and leave things as they are and pay the CGT or
2) Transfer via gift 50% of the property value to me and carry on this other route. It all depends on whether there is SDLT to pay on the transfer to me and whether this is more than the CGT payable in 1)

My confusion is about the SDLT – whether this is payable or not.

Thanks for any replies.

Ivan



Comments

by Mark Alexander

13:23 PM, 10th June 2017, About 5 years ago

Reply to the comment left by "H B" at "10/06/2017 - 13:00":

A properly drafted Deed of Gift would work equally well for an unencumbered property, but not a mortgaged property.

Both forms of documents can be purchased very cheaply on the internet and can sometimes even be downloaded free of charge. We do not recommend this as many such documents are not fit for purpose.
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by Ann Sheehan

21:48 PM, 11th June 2017, About 5 years ago

Hi mark.

Sorry for delay. Yes planning to sell just want to make use of both our cgt allowances.

This is my only BTL and if I do get any more will definitely be through a company not a llp.

Thanks

by Mark Alexander

23:06 PM, 11th June 2017, About 5 years ago

Reply to the comment left by "Ann Sheehan" at "11/06/2017 - 21:48":

Hi Ann

In that case it probably isn't worth doing it in your case, particularly due to the value of your property and the size of the mortgage.

If you were to transfer more than say £60,000 then you that would be OK because the mortgage consideration would be deemed to be two thirds of that based on your 66% LTV, so the £40,000 of consideration would not attract SDLT. However, this would mean you could only transfer 8% of the beneficial interest in your property before having to pay SDLT.

You haven't said how much the capital gain is or what your incomes are but if 8% of your capital gain x 18% or 28% for CGT is less than the £300 it would cost to do the Declaration of Trust the excercise would be pointless.
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by Ann Sheehan

19:55 PM, 12th June 2017, About 5 years ago

Reply to the comment left by "Mark Alexander" at "11/06/2017 - 23:06":

Thanks mark. M

Only want to make use of cgt annual allowance so would only need to transfer 11k of any gain don't we?

Cgt approx 100k and equity about 250k.

Thought we could transfer 40k of the equity so 16% or so of the gain to save the full annual
Allowance, so saving 11k x 28%. Or 3k.

If I made a mistake - apologies.

Ann.

by Mark Alexander

7:13 AM, 13th June 2017, About 5 years ago

Reply to the comment left by "Ann Sheehan" at "12/06/2017 - 19:55":

Dear Ann

I follow your logic.

Property118 Limited couldn't put together a Declaration of Trust on that basis but I've had a friendly chat with Mark Smith at Cotswold Barristers for you and called in a favour. He will assist for the same fee, i.e. £250 + VAT.

Please contact him via his Property118 member profile linked below.

https://www.property118.com/member/?id=1945
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