Transfer of Property to Sibling

sparky130a

Oh do give up pal....

AnotherJoe

hgd7 wrote: »

So thinking about now...

my sister is acquiring a further share in a property which she already parts owns therefore is not liable for the higher rate SDLT - is this right?

the total o/s mortgage is 232K and she is taking this over in full. As such the chargeable consideration for SDLT purposes is 50% of the o/s mortgage = 116k

the standard rate SDLT threshold is 125k, so no, she will not have to pay any SDLT.....what about capital gains? surely not as she is owner from the start?

Capital gains are when you sell (or in your case "gift" ?) something, not buy it.

Whoever she is taking over from (buying? "gifting"?) may have a gain to pay. Is that you by any chance?

gingercordial

hgd7 wrote: »

So thinking about now...

my sister is acquiring a further share in a property which she already parts owns therefore is not liable for the higher rate SDLT - is this right?

the total o/s mortgage is 232K and she is taking this over in full. As such the chargeable consideration for SDLT purposes is 50% of the o/s mortgage = 116k

the standard rate SDLT threshold is 125k, so no, she will not have to pay any SDLT.....what about capital gains? surely not as she is owner from the start?

OP, to be frank the complexity/risk of this kind of thing is why the likes of me get paid a lot of money to be a tax adviser. If you are thinking about engaging in "tax planning" in order to avoid taxes, and don't want to get caught by HMRC now or later, do not try to puzzle this out yourself. It won't work. HMRC aren't stupid.

(No guarantees an adviser would come up with a bulletproof scheme for this either. I wouldn't touch it. Pay your SDLT.)

saajan_12

Remember Stamp duty is payable on the consideration paid, which may be the outstanding balance of a mortgage liability transferred. Capital Gains tax is payable on the increase in market value of the (share of) property transferred, whether gifted or sold, less any actual capital costs (e.g. EA fees to buy/sell, capital improvements)

NOW:
- SDLT on joint property: consideration = 50% of mortgage balance £304k = £116k < £125k threshold so sister pays £0

- CGT on joint property: chargeable gain = 50% of (340k - 295k - costs) - 11.3k allownace = £11.2k. CGT = 28% x 11.2k = £3.14k

- Stamp duty on 600k new property: Normal rate is £20k

LATER:
- Stamp duty for you: Assuming the mortgage balance is still outstanding, the consideration is £232k. Normal SDLT is 0% on first 125k, 2% on rest 107k = £2.14k. Plus Higher SDLT is 3% x 232k = 6.96k. Total £9.1k

- CGT for sister: Assuming the property value is still £340k, she acquired part for 50% x £295k, and the rest for 50% x £340k. Charegeable gain = £22.5k - 11.3k allowance = £11.2k. Depending on whether she is a basic or higher rate tax payer, CGT = 18% or 28% of £11.2k = £2k or £3.14k.


So all in you're paying £32.2k in tax, plus extra legals / mortgage fees in doing the admin for the transfer. Instead of £38k and simplicity.

00ec25

saajan_12 wrote: »

Remember Stamp duty is payable on the consideration paid, which may be the outstanding balance of a mortgage liability transferred. Capital Gains tax is payable on the increase in market value of the (share of) property transferred, whether gifted or sold, less any actual capital costs (e.g. EA fees to buy/sell, capital improvements)

NOW:
- SDLT on joint property: consideration = 50% of mortgage balance £304k = £116k < £125k threshold so sister pays £0

- CGT on joint property: chargeable gain = 50% of (340k - 295k - costs) - 11.3k allownace = £11.2k. CGT = 28% x 11.2k = £3.14k

- Stamp duty on 600k new property: Normal rate is £20k

LATER:
- Stamp duty for you: Assuming the mortgage balance is still outstanding, the consideration is £232k. [STRIKE]Normal SDLT is 0% on first 125k, 2% on rest 107k = £2.14k. Plus Higher SDLT is 3% x 232k = 6.96k. [/STRIKE]Total £9.1k

- CGT for sister: Assuming the property value is still £340k, she acquired part for 50% x £295k, and the rest for 50% x £340k. Charegeable gain = £22.5k - 11.3k allowance = £11.2k. Depending on whether she is a basic or higher rate tax payer, CGT = 18% or 28% of £11.2k = £2k or £3.14k.


So all in you're paying £32.2k in tax, plus extra legals / mortgage fees in doing the admin for the transfer. Instead of £38k and simplicity.

good summary, however, your presentation of the higher rate SDLT is technically incorrect (although mathematically identical).

you do not do a standard rate calculation plus a higher rate calculation, you simply add 3% to the existing bands and work with that allowing for the fact there is no zero rate band
so the correct amount on 232k consideration would be
125K x 3% = 3,750
(232-125)= 107 x 5% = 5,350
total SDLT payable: £9,100

but in conclusion, as several others have already said, OP would be at very high risk of being "done" for tax evasion as the transfer to and back would be seem as linked transactions done solely to evade the higher rate on the purchase of the new residential house so would be unpicked by HMRC and penalties levied accordingly

anselld

00ec25 wrote: »

good summary, however, your presentation of the higher rate SDLT is incorrect.

Mathematically it is the same. It doesn't matter if you add the 3% to each band or once at the end.

00ec25

anselld wrote: »

Mathematically it is the same. It doesn't matter if you add the 3% to each band or once at the end.

yes mathematically it is the same, but the technical presentation is not

saajan_12

00ec25 wrote: »

good summary, however, your presentation of the higher rate SDLT is technically incorrect (although mathematically identical).

What do you think makes a presentation 'technically' correct or incorrect? The requirement is to pay the correct amount of SDLT so any calculation that leads to the same figure of SDLT, given the same circumstances and inputs is equally 'correct'.

Some sources choose to add 3% to each band, I chose to present it this way so it is easy to edit if one key criteria changes (the number of existing properties owned). Also, there are many calculators out there for what I call the 'standard' SDLT so the higher rate is an easy 3% flat add on if you want to change the assumptions slightly.

It's always great to put time into a post aiming to help OP and receive a 'good however *criticism* when the "correction" serves no benefit.

Murray87

Oh do stop being so greedy and pay what you owe. You WILL get caught out in the end so it's not even worth the hassle. But in the meantime you're defrauding the public purse and other tax payers.

00ec25

saajan_12 wrote: »

What do you think makes a presentation 'technically' correct or incorrect?

It's always great to put time into a post aiming to help OP and receive a 'good however *criticism* when the "correction" serves no benefit.

wow, touchy much!

there are many times on here where posters want things explained simply, however, I happen to think that oversimplifying can be equally unhelpful if they do not actually understand the underlying mechanics of the calculation

yes the end result is the same using both methods, but I prefer the way it is shown "officially", as that makes it clear to readers that there is no zero rated band up to 125k and then if the reader wants to check themselves they will see it presented that way as that is how it is set out in the guide

anyway this "discussion" is asinine since the calculator will do it for you when you state this is an additional property not replacing a main home.