Stamp duty on inherited property

susansday

My stepdaughter and I both own our own properties. We have inherited my husband's estate, which includes his bungalow, in a 54/46% split. My husband became severely disabled so for the the last 3 years I was his full-time carer and the bungalow my main residence although I have not informed HMRC. I am undecided about where my future lies. If I buy my stepdaughter's share it would involve paying her £70,000 of my own money (she would also take all the cash from the estate). As this would be a second home, at least in the short term, would 3% stamp duty be payable and if so on what amount? The 54% of the value would be £135,000.

Tom99

[FONT=Verdana, sans-serif]Has the legal or beneficial interest in the property been transferred to you both or is the property still held by the estate?[/FONT]

susansday

Still held by the estate.

Tom99

[FONT=Verdana, sans-serif]In that case take expert advice on whether it is possible to vary the will by means of a Deed of Variation but with consideration involved, which is the unusual part.

[/FONT] [FONT=Verdana, sans-serif]So you and SD have Deed of Variation which says that in return for you giving SD £70k, SD varies the Will such that you get 100% of property and SD gets the cash.

[/FONT] [FONT=Verdana, sans-serif]After that the executor then administers the estate in accordance with the DOV and transfers the property to you.

[/FONT] [FONT=Verdana, sans-serif]You would also need to check the IHT and CGT consequences of doing something like that.

[/FONT] [FONT=Verdana, sans-serif]If there was no DOV and the property was first transferred to you both with 54%/46% split then I think stamp duty would be payable on £135,000 which I think would be at the higher rate, so £4,250.[/FONT]

susansday

Thank you so much for this information. There are no IHT implications or any CGT that I can see but the regulations on the HMRC website are difficult to understand if the beneficiary (SD) who is giving up part of the inheritance is in receipt of compensation from assets outside the will. I will try and find out more and post it here if it is useful for anyone else. I had never heard of a DOV. Thank you again.

Tom99

[FONT=Verdana, sans-serif]Yes you do need expert advice, but my understanding of that clause in the HMRC guidance is that because assets outside the estate are involved, ie your £70,000, then your DOV would not be effective for IHT and CGT purposes but is still a valid DOV for all other purposes.[/FONT]

Robin9

Could the £70000 be seen as Deprivation of Assets and also as a taxable gift should you die within 7 years ?

Tom99

Robin9 wrote: »

Could the £70000 be seen as Deprivation of Assets and also as a taxable gift should you die within 7 years ?

I don't think so because its and exchange not a gift, ie £70k cash for a share in a property worth £70k.

Yorkshireman99

susansday wrote: »

My stepdaughter and I both own our own properties. We have inherited my husband's estate, which includes his bungalow, in a 54/46% split. My husband became severely disabled so for the the last 3 years I was his full-time carer and the bungalow my main residence although I have not informed HMRC. I am undecided about where my future lies. If I buy my stepdaughter's share it would involve paying her £70,000 of my own money (she would also take all the cash from the estate). As this would be a second home, at least in the short term, would 3% stamp duty be payable and if so on what amount? The 54% of the value would be £135,000.

Both You and up your stepdaughter need paid for professional advice legal advice from a specialist gather than a High Street solicitor. A few hundred pounds spent now will be well worth it so there are no future nasty surprises.

Yorkshireman99

Robin9 wrote: »

Could the £70000 be seen as Deprivation of Assets and also as a taxable gift should you die within 7 years ?

It is not a gift. As far as deprivation of assets is concerned there is no obvious intent so the LA would be unlikely to be able prove this.

nom_de_plume

susansday wrote: »

As this would be a second home, at least in the short term, would 3% stamp duty be payable and if so on what amount?

My understanding is you would be liable for 3% SDLT on the £70,000 but you suggest it would only be your second home for a while so, assuming you sell your other property within 3 years, you would currently be able to claim the 3% back after the sale.