Disposal by gift and SDLT surcharge refund + indirect charge mortgage

money_talks

Hi money saving experts!

I'm looking for some advise on the best approach to take in my situation to recuperate SDLT surchage already paid.

In 2012 I purchased house (property A) to be lived in by myself and my mother, with a relatively small mortgage in my name only and myself as the only proprietor.
In between 2012 and 2016 I lived between property A and a rented flat with my partner
In 2016, my partner ( a first time buyer) and I purchased a house (property together to live in. We had to pay surcharge on top of SDLT because I already own property A.

Now it's the last year of when I can dispose of property A to be eligible to claim the SDLT surchage for property B back. So we have started to consider our options of how we could get all/some of the SDLT surhcrage back.

1) I'm trying to clarify my understing of the Condition D in relation to SDLT surcharge ( I'm not allowed to post a link as I'm new)
I believe I have the option of gifting property A to my mother, which would qualify as disposal of that property and enable us to claim the surcharge on property B back. Can anyone confirm and/or have done it themselves?

2) Because my mother is retired and unable to get a mortgage, in order to gift her the property I must either pay off the remaining amount or as I understand take out an indirect charge mortgage through HSBC.

From this thread - ( "Can I go on the deeds but not on the mortgage?"- I'm not allowed to post a link as I'm new) - it sounds as it's possible to take out an indirect mortgage where there is no one common between the mortgagors/proprietors and the borrowers on the mortgage deeds. So my mum would be the sole proprietor/mortgagor and I would be the sole borrower. I briefly spoke to HSBC (as they are the only ones to offer this type of mortgage supposedly) and the person I spoke to did not believe it's possible and either my mother has to be a borrower for the mortgage or I have to remain as the proprietor/mortgagor. So I'm not really sure who can clarify this, but it does sound as if my situation is very similar to that described in that thread.

Any help, suggestions are greatly appreciated. Also recommendations for solicitors that specialise in this field are welcome!

kingstreet

You're likely to be on your own here.

The HSBC product is direct-only, so brokers aren't going to be able to do it for you. The solicitor I know doesn't want any more, even at double the fee.

money_talks

Thank you for the reply!

So it is possible to do what I'm describing? but too much hassle for the solicitors, that they don't want anything to do with it? In that case sounds like we have to find the money to pay off that mortgage, maybe by remortgaging more on property B.

What about the gift aspect, would gifting the property qualify as a disposal to enable us to claim back the surcharge? We spoke to one solicitor who did not seems to know much about that, so I think we need to find one that actually knows a bit about property tax law.

davidmcn

A gift is a disposal, yes. As long as you're off the title - doesn't matter what you get paid.

The trouble with 3rd party securities is the risk of a claim or complaint arising if e.g. your mum realises that her house is now at risk, because of a loan which hasn't been paid to her and which she's got no control over. Which is why banks don't like them these days, and solicitors would probably want to stay clear unless everyone is separately represented.

money_talks

That's good to know about the gift! Thank you davidmcn!
Do you know if there might be any issues transferring it back to me sometime later down the line?

That's annoying about indirect mortgage, I see why she would need to get independent advice, that's what the solicitor said. I guess I now have to find a mortgage provider that offers this, don't quite understand why HSBC told me they don't offer what I'm after when I've read on other threads of people doing it.

Cheeky_Monkey

money_talks wrote: »

That's good to know about the gift! Thank you davidmcn!
Do you know if there might be any issues transferring it back to me sometime later down the line?

That's annoying about indirect mortgage, I see why she would need to get independent advice, that's what the solicitor said. I guess I now have to find a mortgage provider that offers this, don't quite understand why HSBC told me they don't offer what I'm after when I've read on other threads of people doing it.

HMRC are nowhere near as stupid as people seem to think they are - they are wise to that little trick.

Also, it would cause problems if your mum is/or will be in receipt of means-tested benefits or need care in the future as they will consider her 'gifting' her house to you for nothing as deprivation of assets.

money_talks

Cheeky_Monkey wrote: »

HMRC are nowhere near as stupid as people seem to think they are - they are wise to that little trick.

Also, it would cause problems if your mum is/or will be in receipt of means-tested benefits or need care in the future as they will consider her 'gifting' her house to you for nothing as deprivation of assets.

Thank you for the reply. What do you think the HMRC can do in this case and on what grounds?
Yes agree about the means-tested benefits, the reason I bought the house for mum to live in is so that she doesn't have to go into a council home and claim housing benefit.
To be honest I would be more than happy to pay the SDLT surcharge on property A as it's 5 times cheaper than property B. I think it's unfair we had to pay the surcharge on the latest property we bought vs on the property that is not going to be the main home. We were even considering selling property A, claiming back the surcharge on property B and buying another house for mum to live in. With all the fees, the SDLT and the new surcharge on the new property would mean we still get to keep half the money paid in surcharge on property B. But it's just so much hassle and my mum likes the current house.

AnotherJoe

money_talks wrote: »

Thank you for the reply. What do you think the HMRC can do in this case and on what grounds?
Yes agree about the means-tested benefits, the reason I bought the house for mum to live in is so that she doesn't have to go into a council home and claim housing benefit.
To be honest I would be more than happy to pay the SDLT surcharge on property A as it's 5 times cheaper than property B. I think it's unfair we had to pay the surcharge on the latest property we bought vs on the property that is not going to be the main home. We were even considering selling property A, claiming back the surcharge on property B and buying another house for mum to live in. With all the fees, the SDLT and the new surcharge on the new property would mean we still get to keep half the money paid in surcharge on property B. But it's just so much hassle and my mum likes the current house.

They can take you to court show that plainly you attempted fraud by a transparent transfer and transfer back for no good reason other than to evade tax (which is a criminal offence), recover the money add a fine and leave a mark on your credit file which will make it very difficult to get a mortgage or loan in future.

money_talks

AnotherJoe wrote: »

They can take you to court show that plainly you attempted fraud by a transparent transfer and transfer back for no good reason other than to evade tax (which is a criminal offence), recover the money add a fine and leave a mark on your credit file which will make it very difficult to get a mortgage or loan in future.

Thanks. I see your view. I don't see how what we are doing here can be classed as fraud, tax avoidance (not evasion) maybe, but that is legal.
You say "for no good reason", but what are the good reasons for gifting a property between family members? Isn't it quite a common thing to gift your property to your children to avoid inheritance tax?
Maybe I'm missing something here?

Pixie5740

No, what you are proposing is tax evasion rather than tax avoidance. It's also risky because you're giving away an entire property to save considerably less in SDLT in the hope your mother is able/wants to transfer it back to you at a later date.

getmore4less

You will be OK when she dies if it comes to you then.

Why would she want to give away her home before then?