SDLT on tenants in common split 99% to 1%

by Readers Question

14:12 PM, 6th February 2017
About 2 years ago

SDLT on tenants in common split 99% to 1%

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SDLT on tenants in common split 99% to 1%

I am in the process of splitting my buy to let property which I currently own 100% to my wife with 99% to her as she is a NIL taxpayer and 1% to me via tenants in common. I am currently re-mortgaging the property as my current deal is coming to an end. I have been told because I am transferring 99% to my wife I will have to pay Stamp Duty which I wasn’t aware. I was also told because I have another property which is a residential property the stamp duty is 5%. The outstanding mortgage amount is £125,500.split

I wanted to know if this is correct and if so is there another way to avoid the Stamp Duty.

Many thank

Kais



Comments

Mark Alexander

14:27 PM, 6th February 2017
About 2 years ago

Dear Kais

A few questions if I may please:-

1) Why are you remortgaging?

2) is the new mortgage for £125,500 larger than the existing mortgage or the same amount?

3) Presumably you are transferring 99% of the legal ownership to your wife? Have you considered transferring only the Beneficial Interests in the property under a Declaration of Trust as an alternative?

Mark Smith at Cotswold Barristers will be able to help you with the above, whether or not you decide to refinance, and for a fixed fee of £250 + VAT. See >>> https://www.property118.com/member/?id=1945
.

Kais Malique

15:39 PM, 6th February 2017
About 2 years ago

Hi Mark,

I am re-mortgaging because my current residential mortgages has ended and now I am taking out a buy to let mortgage and I thought this will be the ideal time to add her as she is NIL taxpayer. I don't want the property income to push me over to the high tax bracket.

Currently the Mortgage is £128,000 I will be paying an extra to reduce it to £125,500. The currently the property is value at £475,000.

Do I need to have the property solely under my name or do I have to do joint tenancy with my wife if I was to go down the Declaration of Trust route and do I need to complete form 17? If so when do I need to complete the form? Apologies I don't know how declaration of trust works.

I currently have free conveyancing with the new mortgage with Leeds Building Society I am not sure if they can advise regarding Declaration of Trust.

Mark Alexander

15:54 PM, 6th February 2017
About 2 years ago

Reply to the comment left by "Kais Malique" at "06/02/2017 - 15:39":

Dear Kais

Regardless of whether the conveyancing is paid for by the lender or not the conveyancing firm have a duty of care to advise you properly.

Is the remortgage in your name only or joint names?

What advice have they given to you?

Either way, you are going to have to pay for any advice over and above a standard remortgage conveyancing transaction I suspect.

You will not be required to file Form 17 unless the legal ownership of the property is transferred into joint names.
.

Lee Richardson

16:01 PM, 6th February 2017
About 2 years ago

Reply to the comment left by "Kais Malique" at "06/02/2017 - 15:39":

Why is the 5% SDLT? Is it because of the 3% surcharge?

Kais Malique

17:11 PM, 6th February 2017
About 2 years ago

Reply to the comment left by "Mark Alexander" at "06/02/2017 - 15:54":

Hi Mark,

Its currently in my name but was only going to add my wife in the new mortgage if I could pass 99% of the income to her. But I can remove her as the conveyancing is at early stages.

Could I just continue with the property being in my name and do a Declaration of Trust with both of us?

The conveyancer just advised If we both did tenants in common I will have to pay 5% stamp duty because I have another property which is residential. I haven't filled any forms in yet.

Kais Malique

17:18 PM, 6th February 2017
About 2 years ago

Reply to the comment left by "Lee Richardson" at "06/02/2017 - 16:01":

I would be paying a surcharge because I have two properties.

Mark Alexander

17:20 PM, 6th February 2017
About 2 years ago

Reply to the comment left by "Kais Malique" at "06/02/2017 - 17:11":

Maybe, presumably you already have a joint mortgage offer though, which would need to be re-issued.

It would have been better if you had sought professional advice before getting this far.
.

Mark Alexander

17:34 PM, 6th February 2017
About 2 years ago

Reply to the comment left by "Kais Malique" at "06/02/2017 - 17:18":

Even so, it still wouldn't add up to 5%.
.

Lee Richardson

17:34 PM, 6th February 2017
About 2 years ago

Reply to the comment left by "Kais Malique" at "06/02/2017 - 17:18":

Hi Kais,

I had a similar conversation last weekend with a commercial property solicitor. For commercial properties, if the transfer of equity takes place between the parent company and its subsidiary (because they are of linked entities), there is NO 3% SDLT surcharge to pay, he is pretty sure about that.

However, he is not a residential property solicitor. He thinks you may not pay that 3% surcharge between husband and wife, but he asked me to check that with residential property solicitor to confirm.

Lee Richardson

17:47 PM, 6th February 2017
About 2 years ago

Reply to the comment left by "Mark Alexander" at "06/02/2017 - 17:34":

I also wonder where the 5% comes from?

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