Stamp duty on joint mortgaged property - one half gifting share to other half?

Lysimache

1. Thanks, very helpful. Had a look, they wouldn't be connected persons as uncle and niece don't count.

2. But re a gift being free of SDLT - I did a Google search and found this

Where there is the release or assumption of a debt (or the transfer of a property subject to a debt) the debt can constitute chargeable consideration for SDLT purposes. The relevant provisions are in paragraph 8 of Schedule 4 FA 2003.

The basic rule is that where the consideration for a land transaction consists in whole or in part of:
1) the satisfaction or release of debt due to the purchaser or owed by the vendor (paragraph 8(1)(a)); or
2) the assumption of ‘existing debt’ by the purchaser (paragraph 8(1)(b)),
the amount of debt satisfied, released or assumed is taken to be the whole or, as the case may be, part of the chargeable consideration for the transaction.

Where:
1) debt is secured on the property immediately before and after the land transaction; and
2) the rights or liabilities of any party in relation to that debt are changed as a result of or in connection with the transaction,
there is taken to be an assumption of debt by the purchaser falling within paragraph 8(1)(b).

This is an anti-avoidance provision intended to prevent parties temporarily paying off secured debt before property is transferred and reinstating it immediately afterwards.

Would this anti-avoidance principle scupper the idea above of an outright gift and then creating a new mortgage with just the niece on it (with no SDLT due as there's no consideration)?

The two parties (or one party afterwards) can't afford to have no mortgage on the property whatsoever.

(Had a look online if the niece getting a smaller mortgage out, which she could do by paying smaller bits off, when she gets a ‘new’ mortgage in her own right would help make it different enough to not have chargeable consideration. It doesn't look like it - eg https://www.taxationweb.co.uk/forum/sdlt-due-on-transfer-of-equity-btl-t49049.html )

Suspect there's no obvious way then to avoid SDLT on the eventual mortgaged amount (niece is already a residential homeowner). Oh well, suppose that's the way it goes.

rtho782

Does it make a difference if they are Tenants in Common or Joint Tenants?

Lysimache

They're joints.

Pixie5740

Why are you trying to get your head around this? Surely as the transaction involves your uncle and his niece it's for them to take advice about if they can't work it out themselves or are you the niece in this scenario?

Lysimache

I'm not the niece (I'm anonymous here anyway so no reason for me to pretend to not be the niece - but as my other posts will show I'm actually buying a brand new property myself, so I'm definitely not like the relatives above), but they're not the cleverest of people out there and we're a close family so they tend to turn to me when they can't work out rules and stuff. I think I'll have to tell them they'll just have to stump up for the tax unless their lawyers advise otherwise!

Thanks for all the advice