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  • FIRST POST
    • ileven1225
    • By ileven1225 9th Jan 18, 7:33 PM
    • 9Posts
    • 3Thanks
    ileven1225
    Stamp duty for property transfer and purchase (marred couple)
    • #1
    • 9th Jan 18, 7:33 PM
    Stamp duty for property transfer and purchase (marred couple) 9th Jan 18 at 7:33 PM
    Hi Everyone,

    I had a converstaion with HMRC regarding whether there is a stamp duty invovled. Even I completely understand what shall be done for the following two scenarios, I still get confused about why HMRC sets the rule in this way.

    1. A husband owned two properties before they got married: Property A (mortgage free) and Property B (£300k mortgage). After 2-year marriage he is willing to give 50% ownership of either A or B to his wife to make his wife feel more secure living with him. As his wife doesnt' own any property in UK or abroad, even she is married to a man who got two properties, her situation is still considered as 'No Property Ownership'. Therefore, if she got 50% ownership of Property A, she wouldn't pay any stamp duty. If she got 50% ownership of Property B, she would pay stamp duty for the 50% of the mortgage (£125k - 0% and £25k - 2%) at the standard stamp duty rate. It doesn't matter who will pay the rest of mortgage for Property B (it will be the husband), she has to pay the stamp duty for half of the mortgage even she is not going to pay.

    My 1st question is why she has to pay the stamp duty even she wouldn't pay any mortgage? Can the husband keeps 100% mortgage on his own for Property B and transfer the rest to his wife?

    2. The situation is the same as the above, apart from the transfering of ownership, they decided to buy a 3rd property under his wife's name. However, as the husband owns two properties, even his wife doesnt 'have any property, both of them would be considered as a sole party. A 3% additional rate will be applied to the standard stamp duty rate.

    My 2nd question is why she needs to pay 3% additional in the 2nd scenario but doesn't need to pay 3% additional in the 1st scenario?

    Thank you everyone!
Page 1
    • AnotherJoe
    • By AnotherJoe 9th Jan 18, 7:38 PM
    • 7,870 Posts
    • 8,460 Thanks
    AnotherJoe
    • #2
    • 9th Jan 18, 7:38 PM
    • #2
    • 9th Jan 18, 7:38 PM
    In scenario 1 the couple own the same number of houses at the end as they did at the start
    In scenario 2 they own one more at the end than the start.
    • 00ec25
    • By 00ec25 9th Jan 18, 8:02 PM
    • 5,757 Posts
    • 5,208 Thanks
    00ec25
    • #3
    • 9th Jan 18, 8:02 PM
    • #3
    • 9th Jan 18, 8:02 PM
    you have failed to understand that SDLT is based on exchange of chargeable consideration

    in the context of a mortgage free property (A) making a gift of a % share of ownership to the wife does not result in any consideration being exchanged as husbands gets nothing from wife in return for his gift, so no SDLT

    In the context of a mortgaged property (B). The husband is currently 100% liable for the mortgage. However, when he gifts a share to the wife the mortgage lender will (normally) require anyone named on the property deeds to be party tot he mortgage. As you know, mortgages are "joint and several" liability. So instead of having only husband liable for 100% of the mortgage we now have husband and wife each liable for 100% of the mortgage and each can be chased for the debt.

    Tax law sees that position as an exchange of consideration since husband now has someone else who may end up being chased for the debt. To that end husband's liability has been "reduced" since wife could now end up being chased instead of just him. Therefore, there has been exchange of consideration: wife gets a share of the house (and debt), in return for that gift, husband gets another person (the wife) added to the debt liability and so his overall liability is reduced. She gains, he gains, there has been exchange of consideration and so SDLT applies.
    • ileven1225
    • By ileven1225 9th Jan 18, 8:16 PM
    • 9 Posts
    • 3 Thanks
    ileven1225
    • #4
    • 9th Jan 18, 8:16 PM
    • #4
    • 9th Jan 18, 8:16 PM
    In scenario 1 the couple own the same number of houses at the end as they did at the start
    In scenario 2 they own one more at the end than the start.
    Originally posted by AnotherJoe
    you have failed to understand that SDLT is based on exchange of chargeable consideration

    in the context of a mortgage free property (A) making a gift of a % share of ownership to the wife does not result in any consideration being exchanged as husbands gets nothing from wife in return for his gift, so no SDLT

    In the context of a mortgaged property (B). The husband is currently 100% liable for the mortgage. However, when he gifts a share to the wife the mortgage lender will (normally) require anyone named on the property deeds to be party tot he mortgage. As you know, mortgages are "joint and several" liability. So instead of having only husband liable for 100% of the mortgage we now have husband and wife each liable for 100% of the mortgage and each can be chased for the debt.

    Tax law sees that position as an exchange of consideration since husband now has someone else who may end up being chased for the debt. To that end husband's liability has been "reduced" since wife could now end up being chased instead of just him. Therefore, there has been exchange of consideration: wife gets a share of the house (and debt), in return for that gift, husband gets another person (the wife) added to the debt liability and so his overall liability is reduced. She gains, he gains, there has been exchange of consideration and so SDLT applies.
    Originally posted by 00ec25
    Thank you both. Fully undertand now.

    As the husband exchanges of chargeable consideration with his wife for Property B, a stamp duty is applied. If they decide to purchase a 3rd one, as there will be an additonal property, a 3% stamp duty is applied.

    That's clear!
    • ileven1225
    • By ileven1225 9th Jan 18, 8:35 PM
    • 9 Posts
    • 3 Thanks
    ileven1225
    • #5
    • 9th Jan 18, 8:35 PM
    • #5
    • 9th Jan 18, 8:35 PM
    In scenario 1 the couple own the same number of houses at the end as they did at the start
    In scenario 2 they own one more at the end than the start.
    Originally posted by AnotherJoe
    What you said makes sense that as there would be an addtional property purchased in scenario 2, 3% additional stamp duty will be applied. However, in scenario 1, if the wife has owned one property already, even the total number of properties didn't change, i believe the wife still has to pay 3% additional stamp duty on top of the standard stamp duty in order to own 50% of Property B.
    • SDLT Geek
    • By SDLT Geek 9th Jan 18, 9:26 PM
    • 73 Posts
    • 49 Thanks
    SDLT Geek
    • #6
    • 9th Jan 18, 9:26 PM
    • #6
    • 9th Jan 18, 9:26 PM
    A special rule was brought in by the Autumn Budget for transfers on or after 22 November 2017 between spouses. Whilst ordinary SDLT can still be due, if some conditions are met, higher rates SDLT does not apply.

    That explains why for your scenario 1 where your wife acquires a half share in mortgaged property B, the higher rates do not apply.
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