SDLT on inherited share of property?

Popell · 8 January 2018 at 8:32PM

Hi first post so please feel free to send abuse if this is in wrong section....
Wifes father has passed away and he had 80% interest in two properties (total worth approx£260k) remaining 20% belong in equal parts to my wife and her sister.
His wish expressed in his will is for my wife to take his share of the properties and her sis to get equivalent amount in shares. (Calculating value of a share of a property in itself seems a minefield with discounting for probate, tennants in common etc)
Internet search suggests no SDLT payable for inherited property and indeed I rang the tax office and he has confirmed HOWEVER our solicitors (wife works there as an assistant) have said it is payable.
The inheritance will give wife 90% share and we may look to buy sisters 10% (also expressed as a wish in the will.
Whether we do or not will depend on if we can afford to do so.
Both wife and sister own their own property.
Any views/advice chaps?

creditscoremeansnothing · 8 January 2018 at 8:39PM

Inheritance tax is payable from the estate and as a beneficiary you will NOT pay SDLT.

However the nil rate band is £325000 including any gifts within the last 7 years prior to death.

If the total estate is £260k as you suggest then their should not be any inheritance tax either.

Popell · 8 January 2018 at 8:46PM

Thanks Creditscore.
Apologies, the value of the two properties is approx£260K. Shares an additional £220kish but he has his deceased wifes allowance re IHT so still under IHT threshold.

00ec25 · 8 January 2018 at 8:52PM

there is no SDLT payable on inherited assets

however, if your wife subsequently buys out her sister that is classed as a separate transaction and would be subject to SDLT. See example 4:
https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property

are you sure you know what you are doing? Either the will is utter rubbish or you have misunderstood something.

The property comprises 80% owned by FIL and 20% owned by your wife

FIL is now dead. His will left the property to his children: your wife and your SIL.
The will cannot leave the property to your wife and a "share" to the SIL, that is meaningless.
You then say that your wife gets 90% and SIL gets 10% but what does that refer to? wife: 80% x 90% and SIL 80% x 10%?
or
your wife is to end up owning 90/100 and SIL 10/100?

Popell · 8 January 2018 at 9:01PM

Sorry 00ec25, I did say send the abuse!!
I will try to explain myself more clearly
The two properties are owned thus, 80%FIL, 10%wife, 10% SIL, has been for a number of years (7+)
Will gives wife option to have his 80% (we have been managing the properties for about 10 years)
Income from renting was/is split in same proportion.
The shares I referred to are stocks FTSE etc and make up the 'cash' part of his will. The value of the 80% that wife will take is matched from the cash and given to SIL
Initially ownership will go to 90wife/10SIL. We may buy out SIL share if we can afford it.
Thanks again for taking the time to reply, I hope I have made it clearer

EDit, btw the first line of your response is the bit that seems to be the problem for our solicitor....

00ec25 · 8 January 2018 at 9:07PM

Popell wrote: »

EDit, btw the first line of your response is the bit that seems to be the problem for our solicitor....

:eek:?

is this a qualified solicitor?

https://www.gov.uk/tax-property-money-shares-you-inherit/property

note that is on inheritance, not on subsequently buying out the share of the other beneficiary

Popell · 8 January 2018 at 9:12PM

Thanks for the link, yes I found that AND i called to verify but still the solicitor (and the managing partner concurs with him) thinks it is unavoidable and yes, it is a proper firm! Hence my confusion. It may be the way the will is worded (same solicitor did it) but it seems pretty clear from the link you posted

Thanks again

Edit, any idea on what proportion SDLT is payable if we but out the SIL's last 10%. Is it 10% or 100% of the market value?

getmore4less · 9 January 2018 at 6:34AM

What does the will say.
actual wording not a summary.

it is certainly possible to structure a will where one legacy is a property another is the equivelant value(if enough assets) and a residual

You need to keep good records of values/shares of property as there will be CGT implications.

00ec25 · 9 January 2018 at 8:43AM

Popell wrote: »

Sorry 00ec25, I did say send the abuse!!
I will try to explain myself more clearly
The two properties are owned thus, 80%FIL, 10%wife, 10% SIL, has been for a number of years (7+)
Will gives wife option to have his 80% (we have been managing the properties for about 10 years)
Income from renting was/is split in same proportion.
The shares I referred to are stocks FTSE etc and make up the 'cash' part of his will. The value of the 80% that wife will take is matched from the cash and given to SIL
Initially ownership will go to 90wife/10SIL. We may buy out SIL share if we can afford it.

so the 10% that your wife wants to buy from her sister is nothing at all to do with the inheritance. It is a 10% of the property that the sister already owns and has done for at least 7 years.

the property will need to be valued at whatever date the 2 of them want to use - that could be the inheritance date if they want. Obviously the valuation will need to be acceptable to both of them as it is crucial to what comes next and should be a realistic market value as it will be used for probate and CGT .

Wife then pays sister 10% of the value to buy out sister's ownership. That is chargeable consideration for SDLT purposes

sister is liable for Capital Gains Tax on the 10% she has "disposed of". Sister can claim per CGT allowance and depending on the sums may or may not actually end up paying tax.

Popell · 9 January 2018 at 10:00AM

Thanks getmore.. salient bit word for word:- 'I direct my trustees as soon as possible to give in writing to my said daughter (wife) the option of purchasing all my beneficial interest in (or the future proceeds of sale of) the properties (details included)'

I suspect that the intention was as you said

Popell · 9 January 2018 at 10:09AM

Thanks 00ec25
Thats exactly the situation.
I think SIL's husband is more savvy and has mentioned CGT.
I am about to call the solicitors but in answering getmore..'s message I wonder if having been given the 'option to purchase' is the bit that renders it liable for SDLT. It will be a bit unfair if it is as it was presumably written like that so if when the time came it was not an option then an alternative existed but the FIL clear and stated intention was for wife to get the properties and SIL to take the cash equivalent.
His will also stated that it was his wish but not binding that SIL sells her interest in properties to wife.
Ill see how the Solicitor explains it, he cannot blame the way it was written as he did it!
Thanks again

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SDLT on inherited share of property?

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