Stamp duty on gifted equity?

sharrn

My parents mortgage is up in 2 years time, they can't afford to pay it off by then so me and my fianc! are taking a mortgage in our own name to buy it. This will pay the remainder of their mortgage plus giving us a bit over for us to make some improvements and for them to have some to furnish their new home.

The property is on the market currently for £500,000. My parents will be gifting us £350,000 in equity which is being used as a deposit and we are taking out a mortgage of £150,000 for the remainder. Obviously this is all in principle as we are waiting for the valuation to happen next week. So the value will most likely be less than what it is on the market for currently.

My question is how is stamp duty calculated? on the value of the property or on what we are actually paying £150,000? and would we pay anything on a deposit gifted in equity?

Obviously it will make a huge difference as if it is on the property's value we are looking at paying stamp duty of approx £15,000!

Quite confusing but I thought I may be able to get a bit more insight before speaking to the solicitor on Monday.

Ps the mortgage has been accepted etc we are just waiting on the conveyancing to be done.

Mojisola

sharrn wrote: »

My parents will be gifting us £350,000 in equity

Not to do with stamp duty, but do they understand about 'deprivation of capital'?

Senior_Paper_Monitor

Stamp duty will be on the transaction value (not the market value of the property).


Check out 'deprivation' as Mojisola says !!


Where do parents intend to live ?

Typhoon2000

The stamp duty is calculated on the purchase price ( or ,market value if that is higher than the purchase price as this purchase is between connected individuals)

TrickyDicky101

Typhoon2000 wrote: »

The stamp duty is calculated on the purchase price ( or ,market value if that is higher than the purchase price as this purchase is between connected individuals)

No it isn't. 'Connected persons' isn't relevant for SDLT calculations (unlike CGT, for example).

SDLT will be calculated on the consideration which in the OP's case is only the value of the mortgage.

System

On the one hand you want to use the £350,000 as a gifted deposit for mortgage purposes but use it as a consideration ( I.E. class it as a discount ) for SDLT purposes.

I would expect your solicitor to pick up on this and if you insist that it is a gifted deposit then insist that SDLT is paid on the full value of deposit + mortgage.

I think HMRC are pretty wise to this sort of method of trying to reduce SDLT

kingstreet

It is paid only on the consideration, £150,000 and not on the market value.

System

The value you pay SDLT on (the ‘consideration’)

The total value you pay SDLT on (sometimes called the ‘consideration’) is usually the price you pay for the property or land.

They are paying £500,000 for the property although £350,000 is classed as a gifted deposit

and https://www.gov.uk/stamp-duty-land-tax-the-amount-used-to-calculate-whats-payable#calculate-the-chargeable-consideration

And from another HMRC page

Anything of economic value which is given in exchange for land or property counts towards the chargeable consideration.

I think that covers the £350,00 quite well

getmore4less

Anything of economic value which is given in exchange for land or property counts towards the chargeable consideration

The gift is not consideration,

it is what the parents get back for that gift.

If there is nothing given back then no consideration.

anselld

!!!!!! wrote: »

They are paying £500,000 for the property although £350,000 is classed as a gifted deposit

and https://www.gov.uk/stamp-duty-land-tax-the-amount-used-to-calculate-whats-payable#calculate-the-chargeable-consideration

And from another HMRC page
I think that covers the £350,00 quite well

It doesn't. It covers only the 150,000 which is the 'condsideration' given by the purchasers under the sale.

kingstreet

Opinion of a solicitor responsible for completing SDLT returns in this thread;-

https://forums.moneysavingexpert.com/discussion/4169831