Stamp duty on transfer to wife of 10% interest in property??

Thywillbedone

Hi All,

I've done a long trawl through this website and on google for answers to my query. Conflicting articles and not convinced the lawyers involved in my case are correct as they are not tax specialists. I originally posted this on the house buying section by mistake.

Facts:
- I own long leasehold property in London in my own name for several years
- Mortgage (in my sole name) with HSBC c.£475k, value of property c.£750k
- Want to remortgage to take advantage of a very good 5 year fixed deal
- Mortgage company offering the new product is Accord who insist that a married applicant must apply in joint names of husband and wife (note there are no affordability issues but it is, unusually, one of their lending criteria)
- The only reason for choosing Accord (who I understand is a sub prime lender) is that their 5 year fixed product is 0.25% better than any other product out there
- I got married recently therefore my mortgage broker has checked with Accord and I will have to make a joint application
- I believe the joint application thus means I must put my wife on the property deeds by transferring a proportion of the property to her
- I have no problem transferring a % of the property to my wife save I have been alerted to the issue of SDLT arising. I was told if I transferred 50% of the property to my wife, SDLT would be assessed on the consideration she pays me + 50% value of mortgage debt 'transferred'. I would give it to her as a gift therefore, the stamp duty would be 1% of £237,500 = £2,375
- A lawyer who acted for me on the original purchase suggested that SDLT would not be payable if I transfer, say, 10% of the property to my wife since 10% of £475k mortgage debt would be below the 1% threshold
- The lawyers who are acting for me on the remortgage (they are acting for Accord; note the day to day contacts are conveyancing/admin people rather than solicitors) say that % transferred is irrelevant as SDLT is assessed on 50% of the mortgage debt value irrespective
- I assume my remortgage lawyers view is based on the fact that the mortgage would be a joint and several liability going forward
- Note that my wife has never, does not and will not be contributing to the mortgage payments going forward
- My reading suggests that perhaps a declaration of trust could be put in place as part of a tenants in common arrangement (her holding 10%, me 90%) making clear I have full responsibility for the mortgage payments going forward etc i.e. that this would rebut HMRC's assumption that I am benefiting to the tune of 50% of the mortgage debt by my wife joining the mortgage. Question 1: can I rebut HMRC's assumption that I am benefitting from 'offloading' 50% of my mortgage debt to my wife when in fact I will be paying all the mortgage and my wife will only get 10% of the equity anyway (and the entire transaction is being done to meet the lending criteria only)?
- Obviously it would be frustrating to pay £2,300 SDLT to the government simply to take advantage of a mortgage deal (note, it would still be more competitive to do that than to the next cheapest provider...but I would rather save the £££!)
- Note, frustratingly every worked example on the HMRC website involves a 50% transfer of interest so I cannot establish if a smaller % transfer means no SDLT
- Question 2: I assume a joint mortgage application means that I do actually have to change the title deeds to put my wife's name on? Obviously if my wife just joined the mortgage application and nothing was required to change re title deeds etc then the problem would be solved I assume?

Thanks in advance!

VFR-Rider

Wow. long post.

Let someone else confirm... but I don't believe wife has to be on the deeds to be on the mortgage (the reverse, on deeds but not in mortgage, is not acceptable though!).

amnblog

Why are you looking to pick up a potential SDLT bill now just to access an Accord Mortgages product.


If you are looking to them because they are a sub prime lender this is not the case.


You can get a 4 year fixed product below the Accord rate and still keep the ownership as it is.


Finally, if you decide to transfer the ownership to access a rate don't forget to factor in the legal costs and consider the future ramifications.


http://www.hmrc.gov.uk/sdlt/calculate/transfer-ownership.htm

Thywillbedone

amnblog wrote: »

Why are you looking to pick up a potential SDLT bill now just to access an Accord Mortgages product.


If you are looking to them because they are a sub prime lender this is not the case.

Hi. Only reason for using Accord is the 5 year deal is 0.25% better than any other deal in the market. Even with the stamp duty bill it would be cheaper. The fact they are sub prime was not a consideration: my thinking is that cheaper money is cheaper money no matter where it comes from.
I have not seen 4 year deals before.

amnblog

A matter for you but this is a big change just to access a product - particularly when the best priced product in any sector of the market regularly changes.

antrobus

Thywillbedone wrote: »

..... Question 1: can I rebut HMRC's assumption that I am benefitting from 'offloading' 50% of my mortgage debt to my wife when in fact I will be paying all the mortgage and my wife will only get 10% of the equity anyway (and the entire transaction is being done to meet the lending criteria only)?
...

No.

SDLT is payable on the consideration given. HMRC is not making an "assumption", they are applying the law.

http://www.hmrc.gov.uk/sdlt/calculate/transfer-ownership.htm

I believe that your lawyer has given you the correct advice regarding the operation of SDLT.

kaya

Why on earth would you have to apply in joint names for the mortgage? My name is neither on the mortgage or deeds as it's solely in my wife's name, we are waiting to exchange now so the criteria hasn't changed, I would steer clear of an sub prime lenders

Senior_Paper_Monitor

Accord have not been a 'sub prime' lender for many years - indeed, very much at the other end of the scale these days (although some of their picky underwriting traits have continued )

Thywillbedone

To answer the questions:


- only applying in joint names as it is a requirement to access the Accord product...the mortgage broker agrees it is very unusual. I am now re-considering as amnblog has helpfully pointed to a 4 year deal which is likely to be far less hassle if I can apply in sole name


- not sure if they are sub prime or not but not sure what difference it makes if I have no interaction with them post set up?


Thanks for all replies so far

Thywillbedone

antrobus wrote: »

No.

SDLT is payable on the consideration given. HMRC is not making an "assumption", they are applying the law.

I have read this several times but as no worked example includes a less than 50% transfer of ownership it is not helping me - or are you saying that my wife IS actually taking responsibility for 50% of the mortgage in law by being a joint applicant on the mortgage notwithstanding she will not be paying any part of the mortgage going forward (which I could prove to HMRC in a declaration of trust/some other deed)?

Dave_Ham

To a degree this will come down to interpretation.


Just tell your solicitor you will be doing the SDLT return yourself.


That said, another product may well provide an alternative less complicated solution.