Selling second home pre-purchase - Exchange or Completion

ypapandr

My wife and I are buying a house. To avoid the 3 per cent extra SDLT, she will gift her property in Italy to her sister. When does the donation have to be completed, is it pre-exchange or pre-completion? I would think pre-exchange but grateful if you could confirm. many thanks!

Linton

Wont Capital Gains Tax based on the current market value be due if the house is gifted?

sheramber

https://www.gov.uk/capital-gains-tax/what-you-pay-it-on

ypapandr

thanks - however, this is her main home and is in Italy so under the double taxation treaty would only be subject to CGT tax in Italy. Correct? However, in terms of timing, when will we need to complete the donation by? Exchange of contracts or completion?

00ec25

ypapandr wrote: »

thanks - however, this is her main home and is in Italy so under the double taxation treaty would only be subject to CGT tax in Italy. Correct?

your wife owns a property in Italy
therefore in no way is it your wife's main home, since you are married and the main home is where you both live, which must be in the UK otherwise you would not be asking on here

that said, you are correct that under the tax treaty property in Italy is taxed in Italy, not in the UK.
see article 13 para 1
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/498371/italy-dtc_-_in_force.pdf

So any tax your wife as the owner would face would be under whatever Italy does for property sales, of which I have not even the first idea

ypapandr wrote: »

tHowever, in terms of timing, when will we need to complete the donation by? Exchange of contracts or completion?

SDLT in the UK is due on completion not on exchange
https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm07600

ypapandr

Perfect, so from the above, my conclusion would be no CGT in UK and no extra 3 per cent SDLT if asset transferred in Italy pre-completion. We are waiting for mortgage valuation so I'd expect exchange to happen in 4/6 weeks and completion 2/3 weeks after that. Does that seem about right?

uknick

Wow, I wish my brother was that generous to give me a house to avoid paying extra SDLT. I can only assume the SDLT 2nd home charge exceeds the value of the property in Italy and any Italian taxes due on the sale/transfer.

silvercar

uknick wrote: »

Wow, I wish my brother was that generous to give me a house to avoid paying extra SDLT. I can only assume the SDLT 2nd home charge exceeds the value of the property in Italy and any Italian taxes due on the sale/transfer.

I would guess it is a family home and it doesn't much matter which siblings name is on the deeds.

SDLT_Geek

silvercar wrote: »

I would guess it is a family home and it doesn't much matter which siblings name is on the deeds.

SDLT has little to do with "whose name is on the deeds". What matters is who has an underlying interest in the property. So "putting a property into the name of a sister" whilst retaining an underlying interest does not do anything to save SDLT. The property would still "count against" the person with the underlying interest for SDLT purposes.

silvercar

SDLT_Geek wrote: »

SDLT has little to do with "whose name is on the deeds". What matters is who has an underlying interest in the property. So "putting a property into the name of a sister" whilst retaining an underlying interest does not do anything to save SDLT. The property would still "count against" the person with the underlying interest for SDLT purposes.

How would hmrc know that anyone retained an underlying interest? Particularly for a property overseas?

00ec25

silvercar wrote: »

How would hmrc know that anyone retained an underlying interest? Particularly for a property overseas?

as ever, there are sophisticated frauds and simple frauds, some work, some don't

in principle you are correct, whether "you" are sufficiently dishonest to want test it is a different matter