Stamp Duty on a transfer of property title?

Faceman98

Hi everyone,

I have what I thought was a simple transaction but I may be mistaken and I'm hoping for some clarification.

I have a property with title and mortgage in joint names with my Dad. He is named as at the time of purchase I needed his income multiple to get the mortgage (although I am the one who pays).

I'm now married and have moved out; I'm looking to rent the property out so would like to change to a BTL mortgage and also update the title, removing my Dad and replacing with my wife. I am hoping to avoid any future inheritance tax issues.

Is there are stamp duty to be paid for this? I'm very confused.

Property value £280,000
Current mortgage £141,000
New mortgage £163,000

Any assistance would be greatly appreciated.

zygurat789

Your father owns a part of a house in which he does not live and is selling this to you. This will give rise to a potential CGT liability because the sale will be at market value for tax purposes.

anselld

No stamp duty.

The "consideration", i.e. the notional value of money changing hands is half of the outstanding mortgage assuming you own in equal shares. £70,500 which is below the threshold though you will probably still need to complete an SDLT return for nil amount.

CGT as above is a potential issue though.

Faceman98

Thank you both for your comments. This makes sense.

In trying to avoid inheritance tax down the line I have inadvertently stepped in to a capital gains tax trap... damn!

You are correct we both assume 50/50 ownership.

House purchased in 2008 for £160,000 (£141,000 mortgage)
Re-mortgage value £280,000 (163,000 mortgage)

So, can I apply the exemption for each year I have held the house? The tax payable would be at my Dads rate of tax rather than my wife's? He is basic and she is high.

anselld

Your share is exempt (PPR).
Your dads share ( £60k) is liable to you dad.
You get off scot-free.

You don't get an exemption per year, only one in the year you dispose.

booksurr

Faceman98 wrote: »

Thank you both for your comments. This makes sense.

In trying to avoid inheritance tax down the line I have inadvertently stepped in to a capital gains tax trap... damn!

You are correct we both assume 50/50 ownership.

House purchased in 2008 for £160,000 (£141,000 mortgage)
Re-mortgage value £280,000 (163,000 mortgage)

So, can I apply the exemption for each year I have held the house? The tax payable would be at my Dads rate of tax rather than my wife's? He is basic and she is high.

in this case it may be very worthwhile paying for advice from an accountant who is expert in CGT

there are 2 possibilities:

1. your father is liable for CGT: let us assume the market value of the property is 280. The gain is this 120, ie 60k each. Your father gets his personal allowance of 11,000 (once only in the year of sale, not cumulatively) leaving him with next liability of 49,000. Your father would pay some CGT at 18% and the balance remaining from his annual income + 49,000 - 42385 (HR threshold) at 28%. Mathematically the worst this could be is £13,720

2. specialist advice establishes that father is not and never intended to be a beneficial owner. Father therefore has zero liability. CGT is based on beneficial ownership not legal ownership. So if he can establish that he was never a beneficial owner since he was merely included to "secure" the mortgage and never paid any of it so has no financial stake in the property nor will he receive no cash from disposing of his share to you then he cannot under any circumstance be held liable for CGT. That is obviously a specialist area !

How much it would cost to get that advice is then a simple comparison against how much CGT payable he faces under option 1

Faceman98

Thank you both. This was very helpful.

booksurr I really like option 2. But I'll definitely need to speak to a tax specialist. These things are never simple!