Transfer of equity with partner not spouse and SDLT?

Transfer of equity with partner not spouse and SDLT?

12:19 PM, 16th May 2022, About 3 months ago 3

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I own a BTL property in my sole name and intend to transfer the title into joint names with my partner and transfer a small percentage of equity (10-15%). We are not married so it’s not a transfer between spouses.

The property is mortgaged and the transfer is because all our other BTL properties are in joint names, it can help manage our rental income within the 20% tax rate and in the longer term assist with reducing CGT.

My understanding is that a mortgaged transfer is viewed by HMRC as ‘consideration’ and if the amount of this consideration is over £125k standard SDLT is due and if over £40k additional SDLT (3%).

I was intending to transfer a relatively small equity share of (10-15%).

My understanding is that if this % of the property value (the consideration) is below the £40k additional SDLT threshold then no SDLT will be due.

Does anyone know if this is the correct understanding?

Adrian



Comments

Alex View Profile

12:40 PM, 16th May 2022, About 3 months ago

Hi Adrian

Your understanding is correct. However, what you describe is a very 'blunt tool', i.e. it doesn't really achieve much benefit. You would be far better off forming a legal Partnership with your partner and sharing the rental profits, sale proceeds, etc in whatever proportion you wish, varying from year to year if necessary. None of this has to have an accompanying SDLT or CGT liability, as long as the legal documentation is correctly drafted.

I strongly recommend that you book a Property118 Tax Planning Consultation and have your circumstances and goals thoroughly reviewed by an experienced Tax Planning Consultant with access to legal advice from experienced, qualified and insured Barristers.

https://www.property118.com/tax/book-a-consultation/

Regards

Alex

CMS View Profile

6:13 AM, 27th May 2022, About 2 months ago

It is not the property 'value' that is important for SDLT in this situation it is the chargeable consideration.

You are pretty much right but for consideration, if the property is mortgaged and in your sole name, with you transferring it into joint names then the SDLT is payable on half of the amount outstanding on the mortgage at the date of transfer.

I don't know your financial situation or how much you owe on the mortgage, but if you had enough savings to pay off your mortgage, and SDLT was so much that this was worth it you could do the following (ideally for you all in the same day):

1. You pay off the mortgage with your own money;
2. Transfer property into joint names;
3. Get a new mortgage on property in joint names. You take your money back.

The fact that the mortgage is paid off before the transfer will mean 0 consideration so no SDLT although it would be considered a gift for IHT purposes so you may have a lifetime gift tax to pay (well your partner will!) if you dont reach the 7 years. I hope this helps

Crossed_Swords

14:52 PM, 29th May 2022, About 2 months ago

You would also be liable for CGT on the market value as you are not married

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