Stamp duty trap transferring property back into sole name?

Stamp duty trap transferring property back into sole name?

10:23 AM, 10th February 2022, About 3 months ago 7

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Dear All, I am trying to re-mortgage a leasehold flat as my current deal has moved onto an SVR.

The flat is jointly owned with my wife (as a Tenancy in Common with the intention of my share being 99% and my wife 1% – however, we never did create a Deed of Trust to that effect or submit a Form 17 to HMRC).

To comply with the new lender’s mortgage conditions (no Tenancies in Common acceptable to them) it has to be moved into my sole name at the same time as the remortgage. For income tax purposes, it is preferable to remove her from the title rather than moving the property back to a joint tenancy. There will be no payment to my wife for her share, although I will, of course, be assuming her share of the mortgage (although I don’t know if that is 1% or 50%)??

The flat has a mortgage of £180k. I understand that the ‘consideration’ for SDLT purposes is deemed to be 1/2 of the mortgage and that this would be charged at 3% (as we own multiple properties), so 3% of £90k etc.

However, some online info suggests that the Finance Act 2018 has exempted inter-spouse transfers from SDLT in this situation. Of course a little knowledge is a dangerous thing….

Does anyone have knowledge of this situation, please, or any clever fixes?

Thanks in advance.

Karl



Comments

by Neil Patterson

10:30 AM, 10th February 2022, About 3 months ago

Hi Karl,

Please see >> https://www.property118.com/new-sdlt-rules-can-help-smaller-landlords/

A little known amendment to Stamp Duty Policy in the Autumn Budget 2017 could help 1,000’s of small landlords in regards to their tax planning.

The changes were billed as “Minor Amendments” and were overlooked by many landlords and their accountants who believed the changes wouldn’t affect them.

HOWEVER, the new rules confirm that the additional 3% of Stamp Duty does not apply to transfers between spouses. For landlords who wish to share beneficial ownership with spouses for tax planning purposes this is extremely welcome news, particularly for landlords whose properties are mortgaged.

And >> https://www.property118.com/sdlt-transfer-mortgaged-property/

And >> https://www.property118.com/relief-higher-rate-sdlt-spouse-transfers-true-false/

I would recommend you consider booking a tax consultation >> https://www.property118.com/tax/

by Ian Narbeth

10:33 AM, 10th February 2022, About 3 months ago

Hi Karl
The legal estate is held by you as joint tenants. It cannot be held as tenants in common - see s36(2) Law of Property Act 1925. I am surprised your lender has a problem. Are they not lending to couples or joint owners at all? I have seen the opposite case where the bank insisted on the property being in joint names. They did not ask about the beneficial interests.

I suggest you check with the solicitors you are using as this does not seem right.

by Mark Alexander

12:12 PM, 10th February 2022, About 3 months ago

In the circumstances outlined there would be no SDLT or CGT to pay whatsoever, because the mortgage consideration is below £125,000 in this instance and as you have correctly pointed out the 3% SDLT Additional Rate will not be applied either.

I also agree with Ian Narbeth's comments.

by David

15:11 PM, 10th February 2022, About 3 months ago

Reply to the comment left by Ian Narbeth at 10/02/2022 - 10:33
I wasn't clear from the original post whether the property was purchased as tenants in common?

by Ian Narbeth

10:42 AM, 11th February 2022, About 3 months ago

Reply to the comment left by David at 10/02/2022 - 15:11
David
The legal estate and the beneficial interest are different interests in a single property. Where two people acquire a property the legal estate must be held as joint tenants. The beneficial interest may be held either as joint tenants, meaning that the property passes by survivorship when one owner dies, or as tenants in common in equal or unequal shares.
The beneficial interests are strictly not really relevant to a mortgagee as the mortgagee takes free of them. The OP seems to be wrongly advised as lenders generally will lend to two or more people. I suspect someone has misunderstood the point I have just explained.

by Karl Noonan

11:56 AM, 11th February 2022, About 3 months ago

Many thanks to you all; that is so very helpful. What a great resource this site is.

The re-mortagage is placed with the State Bank of India and my mortgage broker told me that they do not accept leaseholds that are held as tenants in common.

We created the lease in 2015 (as an underlease in 2015) and hence had to put it in joint names with my wife as I held the 'superior' lease. That situation has now changed so want to put it back into my own name. Flat is registered in joint ownership with a restriction of disposal by a sole proprietor (I believe this is standard with a tenancy in common).

When I went back to my accountant with your advice on the SDLT issue he changed his position. I have had misgivings about this firm for a while and I think it may finally be time to go elsewhere ....

by Suresh Parikh

13:32 PM, 11th February 2022, About 3 months ago

Hi
As is often the case, the papers often reveal a different story from the one told by the aggrieved party.
Firstly, you cannot compel a Lender/Mortgagee to lend you money, if they do not want to.
What is registered at the Land Registry? Freehold or Leasehold title or both?
In view of merger, I cannot see how you granted a Lease to yourself.


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