Stamp Duty Query

Mungrag

Hello,

I have read all the stamp duty FAQ’s etc , but still unsure whether stamp duty would be paid in my situation, and so looking for some assistance.

Current situation:-
- Joint mortgage on a house and a flat with ex-partner (not married).
- flat purchased in sept 2008 and rented out since nov 2012, when we bought the house.
- intend to transfer the house to her, whilst I receive a small amount of equity.
- intend in the future to transfer the flat to me but it is currently in negative equity.
- the house is valued at 145K against a mortgage of 123K
- the flat is approximately valued at 50k against a mortgage of 65k

Will the additional 2nd home stamp duty apply here, or are there exceptions since the mortgage on both properties are existing and stamp duty has already been paid in the past?

If stamp duty does apply, would there be any way around it (legally of course!) ?

Thanks

00ec25

so where are you living whilst all this is going on and do you own that place?

Mungrag

I’ve been renting a flat since April.

00ec25

[STRIKE]she will have to pay higher rate SDLT upon becoming owner of the remainder of the house since 50% of the o/s mortgage is >the higher rate 40k threshold[/STRIKE]

you will not have to pay any SDLT at all on the flat since 50% of the o/s mortgage is below both the higher rate (40k) and std rate (125k) thresholds

as the flat has been "rented out" (ie let), she will have to pay CGT on the disposal of her share to you since it is not her main (exempt) home. The gain will be based on difference between market value at date of disposal and original purchase price. The mortgage is irrelevant in that context.
She can claim her CGt allowance (£11,7000 and depending if she was both owner and lived there as her main home between 2008 - 2012 when the letting started, she could claim that as an exempt amount against the gain

Mungrag

Thanks 00ec25

So SDLT does apply then ��. Am I right I’m saying then If we try and do it the other way around, and transfer the flat to me first, would the SDLT not apply for as 50% of the o/s mortgage is less than 40k ? This would then free her from having a 2nd home when transferring, thus avoiding the SDLT?

Also regarding the CGT, if the flat was bought for 80k and is now worth only around 50k, would this value depreciation negate the CGT ?

Thanks again

SDLT_Geek

Let us say you have a half share in the house worth £145,000 and transfer it to her. It is likely that the chargeable consideration for her will be £72,500. But in my view it is unlikely that the higher rates will apply, so there will be no SDLT, though she will need to do a return.

My reason for thinking the higher rates are unlikely to apply is because although I assume she has a half share in the flat, the flat is only worth £50,000, so her share is worth under £40,000. HMRC in their guidance say that the "major interest" one should value for these purposes is her half share. The legislation is not quite so clear. On one view it could be read as saying to look at the value of the property as a whole, but that interpretation probably does not accord well with the purpose of the legislation.

00ec25

SDLTgeek ... so well named

OK have amended earlier post, she is not liable to higher rate SDLT as she does not , in the context of SDLT, own an additional property as her interest in the flat is <40k

so she is liable under standard rate rules where the threshold is 125k so, as geek says, no SDLT due on the house

Mungrag wrote: »

Also regarding the CGT, if the flat was bought for 80k and is now worth only around 50k, would this value depreciation negate the CGT ?

yes it would, you don't pay CGT on a loss

Mungrag

Thanks very much geek and 00ec,, much appreciated. Fingers crossed the powers that be agree !