SDLT on transfer of mortgaged property to spouse?Make Text Bigger
Is SDLT always due on a transfer of part of a mortgaged property to a spouse, even if the declaration of trust which gives effect to the transfer makes clear that responsibility for the mortgage has not changed?
I have two rental properties that I own with my wife, both of which are mortgaged.
Both of the properties were my home at different times. After we got married, we arranged that we would become tenants-in-common of the properties, with me retaining 99% ownership and my wife 1%, in order to take advantage of private residence relief on any CGT due when we eventually sell the properties.
Being married, we took the default option of being taxed as if we owned equal shares. Although I am a higher rate taxpayer and my wife is a basic rate payer, we were working on the assumption that the eventual saving on CGT would be more than the extra income tax I pay by not arranging the share of ownership differently.
However, with the new tax on mortgage interest, this assumption is looking less realistic, so I’m considering flipping our share of ownership, and sending a Form 17 to HMRC, with the effect that my wife owns and is taxed on 99% of the property, with 1% for me.
Assuming that this is a sensible thing to do (and please tell me if it isn’t!): I understand that no CGT is due on transfers between spouses. However, in theory SDLT is due on the share of the mortgage which is being transferred.
The declarations of trust which set out how the properties are divided between us both cover responsibility for the mortgage. One states that we are responsible jointly and severally; the other states that I am wholly responsible.
So, given that we don’t propose to change either of these arrangements – and hence, responsibility for the mortgage is not changing despite the transfer – is SDLT still due?
If SDLT is still due, could the transfers be done over the course of several years, in order to keep the numbers below the threshold for a single transaction?
A follow up question: the original declarations of trust were drawn up by our solicitor. Would it be a breach of copyright to create new ones by directly amending the old ones? If so, would it instead be better to write a new document which refers to the originals and describes any changes?)
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