Stamp Duty - Parents House

niallmacmillan

Thats sums things up perfectly and thanks for your time reading my posts and explaining it in a dummys guide. (Just what I needed)

BUT......

I have received this response from another source

If your partner is entitled to £100K of the house then you should only be paying £170K for it. You need to be upfront with mortgage lenders and explain that house is worth £270K so why can't they lend you £170K on a house worth £270K even though you are only paying £170K for it as they will have a security which they can realise for £270K?

This is very important - don't let financial advisers complicate the issue - with imaginary deposits etc - the fact is you only want to pay £170k for the house and that's what it is worth because your partner already "owns" £100K of it. Therefore you should only have to pay £1700 SDLT because that is what you are actually paying.

SDLT is based on the price actually paid and questions of market values only come in when there is some obvious fiction created to disguise the real nature of the transaction. If MIL owned it outright and want to sell it to you for only £250K then if that's all you paid the SDLT would only be £2500. There could be other implications - but not for SDLT.

Is this possible or should I completely disregard this?

GDB2222

Don't disregard it. It's 100% correct.

Richard_Webster

Don't disregard it. It's 100% correct.

Thanks, Guess who posted it!!!

niallmacmillan

I have been researching some more and I have found the below on the HMRC Gov Website.

SDLT is charged on the total value of what's known as 'the chargeable consideration'. The chargeable consideration includes everything of economic value given in exchange for the property - so as well as a payment of money, it can include a release from a debt, the transfer of an existing mortgage, or the provision of other services.

Does this mean that the 170K that the MIL will be receiving will be the Chargeable Consideration. As this is the only payment of money.

As she will not be receiving 270k and we would own the 100k when she "gifts" it to us.

Can someone please explain the whole "gifting" process.

Does she have to declare it to us and if so how?

I apologise for once again dishing out my daily dose of questions.

How would I learn otherwise!!

Richard_Webster

Does this mean that the 170K that the MIL will be receiving will be the Chargeable Consideration. As this is the only payment of money.

Yes. No need to complicate the SDLT issue any further than that.

As she will not be receiving 270k and we would own the 100k when she "gifts" it to us.

Can someone please explain the whole "gifting" process.

Does she have to declare it to us and if so how?

There isn't any "process". You are trying to make a formality out of something that isn't. Some posters have confused the SDLT issue here.

However the fact the at she is selling for less than market value will have some implications. (Remember there is no entitlement to the £100K worth until MIL dies.)

A mortgage lender may want to know what the property is actually worth £270K and because of family relationship and eventual proposed gift in will MIL is selling more cheaply.

Benefits Agency may be interested further down the track if she claims benefits of various kinds and has "given away" part of the value of her house.

You may have to take out undervalue indemnity insurance in case MIL goes bankrupt within 5 years and her creditors allege that she sold the house too cheaply.