Transfer of Equity - SDLT linked transactions?

rgpx

I'm buying out my ex-partners share of the (leasehold & share of freehold) flat that we currently hold as tenants in common. In April this year I paid her £70k for 50% of her share. I completed the SDLT return but there was no SDLT to pay at that time.

I am now in a position to buy out her remaining share for £70k.

It was always our intention that I would buy the remaining share once I could afford to do so (this has come earlier than anticpated as a result of early retirement and a pension lump sum), but there was no contractual obligation on me to do so, and had circumstances changed I could either have sold up instead or agreed to pay her rent on her remaining portion instead.

I had assumed that the two transactions would be "linked" for SDLT, so that £300 would be payable but am now having doubts.

I am not looking for an avoidance strategy here, and am happy to pay if necessary -- I just want to do this correctly. Unfortunately the HMRC are of no help here, as their helpline just say that as it's a self-assessment form it's up to me to decide if they are linked!

Any advice?

davidmcn

If no obligation then I can't see that they're linked.

G_M

davidmcn wrote: »

If no obligation then I can't see that they're linked.

Are you sure?

had circumstances changed I could either have sold up instead or agreed to pay her rent on her remaining portion instead.

No obligation to buy, but if buying, then an obligation to pay.

Plus from https://www.gov.uk/guidance/sdlt-linked-purchases-or-transfers

SDLT transactions that count as linked

HMRC counts transactions as linked if:

• there’s more than 1 transaction
• the transactions are between the same buyer and seller or between people connected with either of them
• the transactions are part of a single arrangement or scheme or part of a series of transactions

davidmcn

G_M wrote: »

Are you sure?
No obligation to buy, but if buying, then an obligation to pay.

Plus from https://www.gov.uk/guidance/sdlt-linked-purchases-or-transfers

I think it needs more than what has been described to make them linked (or a series of transactions).

G_M

As always with tax, it's not straight forward!

SDLTM30100 - Application: Linked transactions FA03/S108

Series of transactions

Series of transactions means something more than that one transaction following the other. There must be something else to connect the transactions.
It would however be a question of fact whether purchases are totally unrelated. In particular the purchaser needs to consider whether the fact that the first transaction had happened had affected the terms of the second transaction.
Where successive transactions are linked, for example the grant of an option and its exercise, extra tax can be due for the first transaction.
Any extra tax is payable at the same time as tax is payable on the second transaction. See FA03/S81.

rgpx

As always with tax, it's not straight forward!

Indeed! Thanks to both of you for your replies.

I had read the guidance at both of the links you provided before making my original post. The first one has an example of a much more complex scenario with successive transactions, which ends with the following example of transactions that are not linked:

This could be the case if the speculator had bought each of the 3 houses from the same builder in 3 completely separate transactions with:

• no prior agreement or option
• no special price or discount
• anything else to link them

It's that woolly "anything else to link them" that's the killer.

The second link has:

Series of transactions means something more than that one transaction following the other. There must be something else to connect the transactions.

So I guess it comes down to whether the fact that the two transactions relate to the same property is enough to "connect the transactions", in the absence of any contractual link ...

davidmcn

booksurr wrote: »

it looks pretty similar to your case, ie you are purchasing the property by instalment and although not contractually obliged to do so, the end result if you'll own 100% by a series of payments

But the difference there being that the landlord is contractually obliged to sell you the additional shares if you choose to exercise your option.

rgpx

go ask HMRC if you want a definitive answer

I did ask HMRC about it before my original post and was told that as it is a self-assessment form it's up to me to decide whether or not they are linked ... :-(

This seems bonkers to me -- HMRC must have criteria they use to decide whether to challenge what's on the form. I realise thay can't give general tax planning advice, but I would have expected that if I described the specific circumstances they could give me a "yes" or "no".

Anyway, I'll give them another ring on Monday and see if I can get a more helpful response this time.

Thanks again to all for your input.

HappyMJ

booksurr wrote: »

go ask HMRC if you want a definitive answer
https://www.gov.uk/government/organisations/hm-revenue-customs/contact/stamp-duty-land-tax

That would be a good idea if only they did give a definitive answer. Most of the time they can't answer as most of the call handlers don't know the exact circumstance and leave it up to the tax payer to decide.

G_M

In April this year I paid her £70k for 50% of her share. I completed the SDLT return but there was no SDLT to pay at that time.

I am now in a position to buy out her remaining share for £70k.

So
* series of 2 transactions
* same buyer & seller
* same property
* purchase of subsequent shares of same property.

rgpx

I rang the helpline again this morning and got a (very slightly) more helpful answer. I still got the official line that as it's a self-assessment form it's up to me to decide, but she hinted that the fact that my ex-partner would not have been able to sell her portion to anyone else might be considered significant. She also said that if I were to say they're not linked and HMRC were to challenge this I would have to be able to prove my case.

Given the difficulty of proving an absence of linkage (it's not as if there are any documents demonstrating that), I'm inclined to just pay anyway.

It seems that my only other course would be to pay a tax accountant for advice, but as the tax is only £300 I'd almost certainly end up worse off overall even if they said I didn't have to pay it ...