Complicated house buy-out - escape stamp duty?

roofusb

Doozergirl wrote: »

I see that you too appear to own a share of a house worth £400k and to buy out your brother would incur SDLT as well. Now that's just uncanny. Which of these houses do you plan to actually live in?

I did co-own a place with my brother, but we sold it in July (sadly a fair bit short of 400k).

The mortgage would not stay 'as-is', she would need to prove that she could afford a £370k mortgage on her own. If she cant then the lender will not agree to anyone coming off the mortgage.

The mortgage *would* stay as-is, at 312k - the equity buy out is coming from savings, so no bigger mortgage is required. It would be just under 4x salary.

i expect the HMRC attitude will be "you are buying 75% of a house for £300k, you owe us 3% stamp duty on the value of the transaction", and there will be little you can do about this

I'm beginning to think you're probably right, but will seek legal advice anyway. Seems there's no way around the tax man :-(

mynameisdave

To remove the other parties from the mortgage you will need to prove to the mortgage company that the £312k can be serviced without three other parties on the loan.

roofusb

mynameisdave wrote: »

To remove the other parties from the mortgage you will need to prove to the mortgage company that the £312k can be serviced without three other parties on the loan.

Yes, she's aware of that and is fully capable of servicing it alone - it's less than 4x salary, and other than the house she has no debts.

Worst case I would go in with her, which would make around 2.5x combined salary, although I'd prefer to avoid co-ownership after previous experience, at least until we're married.

Richard_Webster

ABCD own property worth £400K with £312K mortgage.

ABCD want to transfer property to ABCX. (I assume that the lender will agree to the transfer and to take the new person X on as a joint borrower.)

The consideration shown on the transfer would be £22K because that is the value of the equity being transferred. Also one quarter of loan is being transferred (but doesn't show as price on transfer deed) and that is £312K/4 = £78K. So the value for SDLT purposes which will need to be shown on the Land Transaction return is £22K + £78K = £100K which is less than £125K therefore no SDLT payable.

Very simple - seems to have been unnecessarily complicated in this thread.

chewmylegoff

Richard_Webster wrote: »

ABCD own property worth £400K with £312K mortgage.

ABCD want to transfer property to ABCX. (I assume that the lender will agree to the transfer and to take the new person X on as a joint borrower.)

The consideration shown on the transfer would be £22K because that is the value of the equity being transferred. Also one quarter of loan is being transferred (but doesn't show as price on transfer deed) and that is £312K/4 = £78K. So the value for SDLT purposes which will need to be shown on the Land Transaction return is £22K + £78K = £100K which is less than £125K therefore no SDLT payable.

Very simple - seems to have been unnecessarily complicated in this thread.

it's not ABCD transfering the property to ABCX. It's ABCD transferring the property to A.

is it your view that in those circumstances the transactions would not be considered to be linked. there is no definition of connected as far as i am aware and although it is normally used to mean a relative or business partner, i would have thought that HMRC would just arbitrarily decide that ABCD are connected because they purchased the property together and have been living in it together.

Richard_Webster

it's not ABCD transfering the property to ABCX. It's ABCD transferring the property to A.

duhhh.... didn't read it properly...

OK so A pays £66K and takes on 3/4ths of mortgage debt of £312K = £234K so total consideration for SDLT purposes is £300K. Therefore £9,000 SDLT payable if one transaction.

Interesting question if the transaction were arranged so that they were done one at a time as to whether they are linked. There certainly should not be any contractual obligation to buy out the other two when the first transaction takes place. My feeling is that it would be linked.

Writing to HMRC explaining that three separate transactions are proposed is tantamount to admitting there is a scheme of linked transactions. I think they would only accept it if it could be shown that at the time of the first transaction there was no intention for there to be a second one etc. Difficult?