Stamp Duty confusion...

ddavis

Hi All,

Hope you can help

I'm purchasing a property off my father.

For the purposes of my mortgage, the property is being bought for £165k. £140k is on a mortgage, £25k is a gift of equity.

My question is should I pay stamp duty on the £25k? Does it count as part of the chargeable consideration?

My solicitors have given conflicting advice (2 different people) and I've phoned HMRC twice and again been told yes and no.

Anybody know for sure? I have saved enough to pay the SD on the full price, but don't want to pay an extra £250 if I shouldn't be.

Thanks
Dan

FireWyrm

Are you sure that the £25K is a gift, because if it is, then you dont pay stamp duty on it since it's not a chargeable consideration.

See here : http://www.hmrc.gov.uk/sdlt/calculate/value.htm

I would say that the £25K is a gift which means you didnt exchange anything for it...therefore, not a chargeable consideration. The fact that you THEN mortgage it for £165 K is beside the point.

This might also apply :

Receiving land or property as a gift or from a will

Someone might be left land in a will or receive it as a gift, for example from their:

• husband or wife
• civil partner
• parent or relation

Property left in a will

If the property is acquired under the terms of a will, there's no need to notify HMRC and no SDLT is payable. This applies even if the beneficiary takes on an outstanding mortgage on the property on the date the person died, provided that no other consideration is given.
Property given as a gift

If the property is received as a gift there's no SDLT to pay, so long as there's no outstanding mortgage on it. But if the person who receives the gift takes over some or all of an existing mortgage, then SDLT may be payable if the value of the mortgage is over the SDLT threshold.
Example

A husband decides to transfer a half share in a property he owns to his wife. She doesn't make any cash payment for this share, but there is an outstanding mortgage on the property. The amount outstanding is more than the current threshold, so SDLT is payable. It's payable even if the husband retains the mortgage. They'll need to notify HMRC of the transaction.

Help and advice about SDLT
If you need any help with working out whether or not SDLT is payable, you can contact the HMRC Stamp Taxes Helpline on Tel 0845 603 0135. The helpline is open from 8.30 am until 5.00 pm, Monday to Friday except on bank holidays

martinsurrey

FireWyrm wrote: »

Are you sure that the £25K is a gift, because if it is, then you dont pay stamp duty on it since it's not a chargeable consideration.

See here : http://www.hmrc.gov.uk/sdlt/calculate/value.htm

I would say that the £25K is a gift which means you didnt exchange anything for it...therefore, not a chargeable consideration. The fact that you THEN mortgage it for £165 K is beside the point.

well either stamp duty is to be paid on the full £165k or its mortgage fraud, as the purchase price is being stated as £165k, NOT £140k.

if its a sale at an undervalue (£140k) then stamp duty is payable on that amount. but then you would be getting a 100% mortgage, which isnt the case.

its a sale for £165 with a gifted £25k deposit from the equity released.

Fire_Fox

Get the name of the person at HMRC telling you you don't have to pay, better still get them to confirm by e-mail.

kingstreet

Purchase at undervalue from a family member sees the contract for the "gross price, leaving the net price to pay", in this case, £165,000. That makes the stamp duty 1% of £165,000 in my opinion.

I'm prepared to be corrected though.

FireWyrm

Did you not read this bit :

If the property is received as a gift there's no SDLT to pay, so long as there's no outstanding mortgage on it

The 25K is a gift, you dont pay SD on it. Only the bit you are purchasing.

OP, what is the ballpark market price?

Fire_Fox

FireWyrm wrote: »

Did you not read this bit :

If the property is received as a gift there's no SDLT to pay, so long as there's no outstanding mortgage on it

The 25K is a gift, you dont pay SD on it. Only the bit you are purchasing.

OP, what is the ballpark market price?

Isn't that only if the whole property is gifted?

martinsurrey

FireWyrm wrote: »

Did you not read this bit :

If the property is received as a gift there's no SDLT to pay, so long as there's no outstanding mortgage on it

The 25K is a gift, you dont pay SD on it. Only the bit you are purchasing.

OP, what is the ballpark market price?

the property isnt being recieived as a gift though, £25k is being recived as a gifted depost!

kingstreet wrote: »

Purchase at undervalue from a family member sees the contract for the "gross price, leaving the net price to pay", in this case, £165,000. That makes the stamp duty 1% of £165,000 in my opinion.

kingstreet wrote: »

I'm prepared to be corrected though.

Thats purchase with a gifted deposit, which is different to purchased at an undervalue.

One lowers stamp duty, one makes it possible to get a better mortgage.

In a purchase at an undervalue you pay stamp duty on the value you pay, but then your max mortgage is based on this lower value (so a 200K house sold for £150k would mean you need a £38.5k cash deposit to get a 75% LTV mortgage, [25% of £150k]), on the completion statement the gross price is the undervalue.

In a purchase with a gifted deposit you pay stamp duty on the whole purchase price but you can mortgage on the market value (so in the above you wouldn’t need a cash deposit to get a 75%LTV as 25% of £200k is the £50k gifted deposit). In this case the gross price is £200k funded through a £50k gifted deposit and £150k mortgage.

Small but important differences (all to the best of my knowledge, if you want professinoal advice I would pay for it).

InMyDreams

martinsurrey wrote: »

the property isnt being recieived as a gift though, £25k is being recived as a gifted depost!



Thats purchase with a gifted deposit, which is different to purchased at an undervalue.

One lowers stamp duty, one makes it possible to get a better mortgage.

As I understand it, the chargeable consideration is just what is actually *paid* (either by cash or taking over someone else's debt/mortgage etc). It's not to do with the market *value* used for the mortgage purposes.

I thought the whole point of a 'gifted deposit' was to get a mortgage based on the higher valuation. Which is why unless the transaction is between close family, the banks won't accept it. Since it's clear here that the gifted deposit is genuine (and not just to inflate the value for mortgage LTV reasons) I thought that was OK.

But then I'm not a professional either.

martinsurrey

InMyDreams wrote: »

As I understand it, the chargeable consideration is just what is actually *paid* (either by cash or taking over someone else's debt/mortgage etc). It's not to do with the market *value* used for the mortgage purposes.

I thought the whole point of a 'gifted deposit' was to get a mortgage based on the higher valuation. Which is why unless the transaction is between close family, the banks won't accept it. Since it's clear here that the gifted deposit is genuine (and not just to inflate the value for mortgage LTV reasons) I thought that was OK.

But then I'm not a professional either.

Imagine it like this.

the home owner gives you an IOU for £25k as a "gift"

you then buy his house for £165k and use his IOU for the £25k deposit and get a mortgage for £140k.

the chargable consideration is the £140k mortgage and the £25k release from the debt (which forms chargable consideration - see HMRC).

so stamp duty is due on the whole £165k

Fire_Fox

InMyDreams wrote: »

As I understand it, the chargeable consideration is just what is actually *paid* (either by cash or taking over someone else's debt/mortgage etc). It's not to do with the market *value* used for the mortgage purposes.

I thought the whole point of a 'gifted deposit' was to get a mortgage based on the higher valuation. Which is why unless the transaction is between close family, the banks won't accept it. Since it's clear here that the gifted deposit is genuine (and not just to inflate the value for mortgage LTV reasons) I thought that was OK.

But then I'm not a professional either.

The lender and HMRC don't necessarily have the same rules.