Stamp duty or not on inherited property

kelloggs36

Are there any solicitors on here or anybody who has experience of this situation?
my sister and I were bequeathed our mother's house when she died. My sister has never had a mortgage before or owned any property before. She is buying me out of my share of the house. We are unsure whether stamp duty would be payable on her purchase of my share. The value of her share is £162,500 and mine £187500 due to her having some inheritence early. In essence, she is having to raise a mortgage for my share and is a first time buyer. She is using her share of the equity as her deposit so to speak.

The mortgage company have appeared to treat the transaction as a remortgage and have said that she may have to pay stamp duty - the property as it stands is still in my mum's name and will be transferred to her and her husband at the time of completion. It has been done as a transfer of equity. There is no mortgage on the property and has not been since about the mid 1990s

She has just queried this and is waiting a response, but it would be good to get other opinions,

Thanks

Yorkshireman99

kelloggs36 wrote: »

Are there any solicitors on here or anybody who has experience of this situation?
my sister and I were bequeathed our mother's house when she died. My sister has never had a mortgage before or owned any property before. She is buying me out of my share of the house. We are unsure whether stamp duty would be payable on her purchase of my share. The value of her share is £162,500 and mine £187500 due to her having some inheritence early. In essence, she is having to raise a mortgage for my share and is a first time buyer. She is using her share of the equity as her deposit so to speak.

The mortgage company have appeared to treat the transaction as a remortgage and have said that she may have to pay stamp duty - the property as it stands is still in my mum's name and will be transferred to her and her husband at the time of completion. It has been done as a transfer of equity. There is no mortgage on the property and has not been since about the mid 1990s

She has just queried this and is waiting a response, but it would be good to get other opinions,

Thanks

She needs specialist advice other than from the lender.

Marcon

Why do you want 'opinions'? There is one correct answer and HMRC won't be remotely interested in however many people on this board disagree with it!

Specialist advice isn't necessary; this is an everyday transaction for those working in this area.

Yorkshireman99

Marcon wrote: »

Why do you want 'opinions'? There is one correct answer and HMRC won't be remotely interested in however many people on this board disagree with it!

Specialist advice isn't necessary; this is an everyday transaction for those working in this area.

You are rude and inconsiderate. YOU may know the answer but the questioner does not, otherwise the question would not have been asked. If you are unable or unwilling, to give an answer say nothing. In any case it is foolish to rely just on a forum like this. A prudent person would ask a professional.

Tom99

Yorkshireman99 wrote: »

You are rude and inconsiderate. YOU may know the answer but the questioner does not, otherwise the question would not have been asked. If you are unable or unwilling, to give an answer say nothing. In any case it is foolish to rely just on a forum like this. A prudent person would ask a professional.

[FONT=Verdana, sans-serif]Agree with that.[/FONT]

[FONT=Verdana, sans-serif]This forum has been very useful in helping to improve my knowledge about probate/property/finance and that makes it easier to know exactly what questions I should be asking the paid professionals I have employed and also in understanding the answers those professionals have given me.[/FONT]

[FONT=Verdana, sans-serif]Of course you have to be aware that the forum is a collection of anonymous bod's some of whom post advice which is clearly wrong. However there are several frequent posters on the probate/property/finance sections who clearly have a near expert knowledge and will often post a reply backed up by a link to the appropriate .gov website.[/FONT]

[FONT=Verdana, sans-serif]Regarding the OP's question, I think the sister remains a FTB and no stamp duty would be paid.[/FONT]

[FONT=Verdana, sans-serif]At the moment the estate owns both the legal and beneficial interest in the property,neither type of interest is yet owned by the beneficiaries.[/FONT]

[FONT=Verdana, sans-serif]The legal/beneficial ownership will only pass to them with a formal transfer document, or in the case of the beneficial interest, when the administration period of the estate comes to an end, even though the estate may continue to own the legal interest.[/FONT]

[FONT=Verdana, sans-serif]How the mortgage co plan to treat the transfer/mortgage does not matter, what matters is how the solicitor, which I presume you will need to employ, understands the SD legislation.[/FONT]

[FONT=Verdana, sans-serif]If you do not already have a solicitor, I would email 5 local solicitors and ask for a fee quote to deal with both transfer/mortgage.[/FONT]

[FONT=Verdana, sans-serif]Having chosen a solicitor, and before appointing them, I would ask their opinion on the SD issue. Hopefully they will say no SD is payable because sister is FTB.[/FONT]

[FONT=Verdana, sans-serif]If they said they thought SD was payable I would 1st email the other four solicitors and ask the same question to see if they all gave the same answer.[/FONT]

[FONT=Verdana, sans-serif]For info - I am not a solicitor.[/FONT]

Yorkshireman99

Tom99 wrote: »

[FONT=Verdana, sans-serif]Agree with that.[/FONT]

[FONT=Verdana, sans-serif]This forum has been very useful in helping to improve my knowledge about probate/property/finance and that makes it easier to know exactly what questions I should be asking the paid professionals I have employed and also in understanding the answers those professionals have given me.[/FONT]

[FONT=Verdana, sans-serif]Of course you have to be aware that the forum is a collection of anonymous bod's some of whom post advice which is clearly wrong. However there are several frequent posters on the probate/property/finance sections who clearly have a near expert knowledge and will often post a reply backed up by a link to the appropriate .gov website.[/FONT]

[FONT=Verdana, sans-serif]Regarding the OP's question, I think the sister remains a FTB and no stamp duty would be paid.[/FONT]

[FONT=Verdana, sans-serif]At the moment the estate owns both the legal and beneficial interest in the property,neither type of interest is yet owned by the beneficiaries.[/FONT]

[FONT=Verdana, sans-serif]The legal/beneficial ownership will only pass to them with a formal transfer document, or in the case of the beneficial interest, when the administration period of the estate comes to an end, even though the estate may continue to own the legal interest.[/FONT]

[FONT=Verdana, sans-serif]How the mortgage co plan to treat the transfer/mortgage does not matter, what matters is how the solicitor, which I presume you will need to employ, understands the SD legislation.[/FONT]

[FONT=Verdana, sans-serif]If you do not already have a solicitor, I would email 5 local solicitors and ask for a fee quote to deal with both transfer/mortgage.[/FONT]

[FONT=Verdana, sans-serif]Having chosen a solicitor, and before appointing them, I would ask their opinion on the SD issue. Hopefully they will say no SD is payable because sister is FTB.[/FONT]

[FONT=Verdana, sans-serif]If they said they thought SD was payable I would 1st email the other four solicitors and ask the same question to see if they all gave the same answer.[/FONT]

[FONT=Verdana, sans-serif]For info - I am not a solicitor.[/FONT]

You are right to raise the question of legal and beneficial interests since few novices know about it. Just one if many pitfalls awaiting the newcomer, and some older ones as well!

Tom99

Yorkshireman99 wrote: »

You are right to raise the question of legal and beneficial interests since few novices know about it. Just one if many pitfalls awaiting the newcomer, and some older ones as well!

[FONT=Verdana, sans-serif]Yes it is very important to understand the difference between the legal and beneficial ownership, particularly if you are executor of an estate which holds a property.[/FONT]
[FONT=Verdana, sans-serif]It is the beneficial ownership which is used for tax purposes, so stamp duty (and therefore FTB status) and the CGT calculations are based on beneficial ownership.[/FONT]
[FONT=Verdana, sans-serif]I was executor to an estate last year which has just that problem.[/FONT]
[FONT=Verdana, sans-serif]Values had risen quite a lot during the estates 1yr ownership and a fairly large CGT bill was going to be paid by the estate, which obviously would be shared between each beneficiary in accordance with their %age inheritance.[/FONT]
[FONT=Verdana, sans-serif]There were a large number of beneficiaries so by transferring the beneficial interest to them, before exchange of contracts, this CGT bill could be avoided altogether.[/FONT]
[FONT=Verdana, sans-serif]However the problem was that one on the beneficiaries was a FTB and they would have lost that status.[/FONT]
[FONT=Verdana, sans-serif]It was a case of weighting up the certain CGT bill with the potential extra cost caused to that beneficiary on up to £300,000 worth of stamp duty.[/FONT]
[FONT=Verdana, sans-serif]The estate's CGT bill was higher than this lost SD so a very difficult decision for a executor to make.[/FONT]

pphillips

Tom99 wrote: »

[FONT=Verdana, sans-serif]Yes it is very important to understand the difference between the legal and beneficial ownership, particularly if you are executor of an estate which holds a property.[/FONT]
[FONT=Verdana, sans-serif]It is the beneficial ownership which is used for tax purposes, so stamp duty (and therefore FTB status) and the CGT calculations are based on beneficial ownership.[/FONT]
[FONT=Verdana, sans-serif]I was executor to an estate last year which has just that problem.[/FONT]
[FONT=Verdana, sans-serif]Values had risen quite a lot during the estates 1yr ownership and a fairly large CGT bill was going to be paid by the estate, which obviously would be shared between each beneficiary in accordance with their %age inheritance.[/FONT]
[FONT=Verdana, sans-serif]There were a large number of beneficiaries so by transferring the beneficial interest to them, before exchange of contracts, this CGT bill could be avoided altogether.[/FONT]
[FONT=Verdana, sans-serif]However the problem was that one on the beneficiaries was a FTB and they would have lost that status.[/FONT]
[FONT=Verdana, sans-serif]It was a case of weighting up the certain CGT bill with the potential extra cost caused to that beneficiary on up to £300,000 worth of stamp duty.[/FONT]
[FONT=Verdana, sans-serif]The estate's CGT bill was higher than this lost SD so a very difficult decision for a executor to make.[/FONT]

I think the situation you describe was a clear cut decision because you can't expect the estate to shoulder a large tax bill to the detriment of many beneficiaries in order to give tax savings to only one beneficiary. This amounts to favouring one beneficiary over all the others.

Yorkshireman99

pphillips wrote: »

I think the situation you describe was a clear cut decision because you can't expect the estate to shoulder a large tax bill to the detriment of many beneficiaries in order to give tax savings to only one beneficiary. This amounts to favouring one beneficiary over all the others.

It really is not like that. That is why professional advice should be sought so that the beneficiary can save without it costing the others.

Tom99

pphillips wrote: »

I think the situation you describe was a clear cut decision because you can't expect the estate to shoulder a large tax bill to the detriment of many beneficiaries in order to give tax savings to only one beneficiary. This amounts to favouring one beneficiary over all the others.

I am afraid its not as simple as that, the executor does not have the sole power to transfer the beneficial interest in a property to the beneficiaries. That requires a transfer deed which all of the beneficiaries sign as well as the executor. The executor may actual sign twice once as the executor and then as a beneficiary.

It might have been possible to only transfer part of the beneficial interest to certain beneficiaries and that is what I would have liked to do, say transfer 80% leaving the estate holding 20%, however my solicitor (STEP) although they thought that would be possible, was not sure. There would be up to 5hrs research fee at £250ph in order to confirm that.

SevenOfNine

No solicitors on here whose credentials you could check.

"Opinions", definitely of value as you can see from some of the useful information already given by some of the others here, they will give you food for thought & perhaps some information &/or pointers to be researched prior to consulting a professional.