SDLT payable on TOE + BTL remortgage?

tttim

Two years ago, before George Osborne changed the SDLT regulations, my girlfriend and I decided to invest in a buy-to-let property as neither of us has a pension. We found a 3-bed property for £148,500, but finding a mortgage proved to be more difficult, because my girlfriend was between jobs at the time and we were both considered as “first-time” landlords. Eventually, we found a 75% LTV deal with BM Solutions, but they were only prepared to offer the mortgage to me; not to the both of us. Consequently, the purchase went ahead with the house and mortgage in my name and stamp duty of £1485 was paid in November 2014. Had the transaction taken place 4 weeks later, only £470 would have been payable.

Since then, we have run the property together as planned without any hitches. However, our (my) cheap fixed rate with BM Solutions expired at the end of September, so we thought we’d take the opportunity to pay off some of the outstanding loan and perform a transfer of equity into both of our names before remortgaging. We found a 60% LTV fixed-rate product offered by Principality with “free legal”, so we have not engaged a solicitor ourselves. JCP Solicitors (acting on behalf of Principality) are prepared to handle the transfer of equity as part of the remortgaging process for an additional fee.

JCP are now telling me that SDLT is payable on the ToE, but how can that be possible? My girlfriend is effectively being gifted a 50% share in property which I already own. No consideration will be paid. I realise that under SDLT rules she is considered to be a purchaser of 50% of the mortgage debt. And seeing as I already own the property, she is surely an individual purchaser, isn’t she? Furthermore, she owns no other share in any other property either here in the UK or abroad. She is effectively a first-time buyer. The house is not being sold and re-purchased; it is being remortgaged. We are not married, in a civil partnership or related in any way, although we do live together in my main residence which I own outright. Having read the guidance from HMRC, I don’t see why SDLT should be payable. Or am I wrong?

Doozergirl

I don't see how you can gift someone something that you don't own - you have a mortgage.

Re-mortgaging would also be indicated by doing the same thing again, which you aren't. If you remortgaged, there would be SDLT payable.

TrickyDicky101

I agree with you - girlfriend owns no other property so additional rate SDLT is not payable. The 'consideration' assuming no other cash is changing hands other than her name being added to the mortgage is half the outstanding mortgage. Assuming that is less than £125k then there should be no SDLT to pay.

tttim

The mortgage will be 60% LTV and my name is currently on the deeds. She is effectively being gifted 20% and purchasing 30% (through assumption of mortgage debt) from me.

booksurr

tttim wrote: »

The mortgage will be 60% LTV and my name is currently on the deeds. She is effectively being gifted 20% and purchasing 30% (through assumption of mortgage debt) from me.

no, the chargeable consideration involved is deemed to be assuming 50% of the outstanding (re-)mortgage liability, not 30% of the value of the property

as you say in all other respects it does not appear she is not liable for the additional rate given she does not own anywhere else and you are not married so the "joint purchaser" rule does not apply. Therefore the start threshold is the single purchaser, one property rate £125,000