Inherited properties jointly with sister, buying her out with mortgage. SDLT # due?

Officechick

Hello, i am brand new and never used these sort of boards before so please be gentle with me! I am hoping one of you can please help on the below scenario:

• My sister and I have recently inherited two properties after the death of our parents.
• All inheritance tax has been paid and the only assets we are left with are the two properties.
• Neither property has a mortgage
• There are no outstanding debts for the estate
• Both properties deeds are still in the name of our parents
• We have a lawyer representing us for the probate
• My sister wishes to keep the property with a lessor value (property A) and my husband and I wish to buy her out of her share of the more valuable property (property
• In order for my husband and I to purchase property B we will need to sell our current property (we have a buyer) and port our mortgage to property B (mortgage company have agreed to port it) (we need the mortgage to fund buying my sister out but also to do LOADS of refurb work as not been touched for 30+ years)

I understand that Stamp Duty is due on “chargeable considerations” that exceed the Stamp Duty threshold of £125,000. As the amount I shall be purchasing from my sister is over the Stamp Duty threshold of £125,000 I am aware that my husband and I will be liable for Stamp Duty on completion of purchasing property B for the amount i am buying her out of.

Question: my lawyer has suggested that we also need to pay Stamp Duty on the value of the mortgage we port or take out when we purchase property B. Is anyone please able to confirm if this is the case? She has suggested we speak with a specialist TAX accountant (who no doubt will cost a small fortune) to get clarity.

I have written to HMRC for clarity but its a 4 week turn around. Over the phone they have suggested (but not committed) that we only pay SDLT on the consideration I am paying my sister which makes sense as a mortgage is not a consideration, its a borrowing. Property B is worth over £1m and our mortgage is a fair size so we are possibly talking large SD amounts here.

I have been trying to get this cleared up for over a month and its taking over my life (not to mention the fear of the huge SDLT costs etc).

Many thanks in advance for any advise.
x

steampowered

Given the amount involved, it sounds worth getting a tax specialist to advise.

I can't imagine it would be that expensive - the advice you are seeking is very specific.

00ec25

SDLT is due on the cash paid to sister only

the mortgage you yourself require in order to source the cash to be paid is irrelevant since the outgoing owner (sister) is not party to that mortgage therefore the sister gains nothing from you having a mortgage. If sister gains nothing then it is not chargeable consideration.

put some numbers to it:
- you and sister inherited property B worth £1m
- you and sister inherited property A worth £300k
total estate £1.3m split in (we assume) equal shares so 650k each

sister has 300k from property A and needs a further 350k in cash so you each end up with the 50/50 split of the total estate

the fact you raise 350k by a mortgage on property B does not form part of the chargeable consideration given to sister as sister has no involvement whatsoever with the mortgage.

As the property has recently been inherited it is exempt from the higher rate SDLT rules. So the chargeable consideration is simply the 350k paid to sister and would cost:
125k @ 0%
125k @ 2%
100k @ 5%
total 350k costing £7,500 SDLT

read the rules given your solicitor appears out of his depth
https://www.gov.uk/stamp-duty-land-tax/residential-property-rates

the principle applied is that of example 4
https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property#gift

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00570

G_M

00ec25 has explained it precisely and accurately, with a worked example.

Beyond confirming that, I can add nothing!


Oh! OK. I can.

If you were paying sister from savings I'd advise ditching the solicitor and just transferring the property yourself as Executers and shoving some cash your sister's way.

But as you are applying for a mortgage, the lender will appoint a solicotor so DIY will not save you much/anything.

Is your solicitor on the applicable lender's panel?

Officechick

OMG you have all been amaxing thanks so much.

00ec25 thanks for your very detailed reply, your description is just as I understood it. the mortgage is irrelevant and if i was buying my sister out in cash (if i had it) then there would be no extra SD. can i ask how you are so knowledgeable?

Officechick

G_M

I am not sure if my solicitor is on the lenders panel. what is it? is it an extra qualification?

we do need a solicitor for the purchase as although i know the house inside out its in an unusual situation (listed, private lane, not been on the market for 30+ years etc) so feel like i do need a professional to help (plus i have a mental busy life with young kids / hubby working long hours etc so very little time).

thanks again all for your help xx

G_M

Officechick wrote: »

G_M

I am not sure if my solicitor is on the lenders panel. what is it? is it an extra qualification?

we do need a solicitor for the purchase as although i know the house inside out its in an unusual situation (listed, private lane, not been on the market for 30+ years etc) so feel like i do need a professional to help (plus i have a mental busy life with young kids / hubby working long hours etc so very little time).

thanks again all for your help xx

Each mortgage lender has a panel of solicitors they use. No extra qualification- though I'm not sure if solictors have to pay a fee to apply to a panel.

Mot larger firms are on most lenders panels. Some lenders have criteria eg they won't use one-man-bands or 2 man partnerships. They may have other criteria.

So if you know which lender you are going to use, either
* ask the lender for a list of solicitors on their panel in your locality, or
* ask you prefered solicitor if he's on xxxx's panel.

The alernative is for you to use your own solicitor to do the purchase/transfer, and the mortgage lender use their solicitor to arrange the mortgage, check the transfer is done properly, and register the Charge.

This duplicates a lot of work, adds coordination and extra exchanges of information, and you end up paying two solicitors.........

Officechick

Many thanks G_M

I was just using a local and small firm for my sale and purchase conveyancing who has been great in the past when i have used them for other things and we will be porting our current mortgage which is with a big high st branch so I would assume they have plenty of in house legal staff.

I cant believe how helpful you have all been, many thanks! xx

G_M

Officechick wrote: »

Many thanks G_M

I was just using a local and small firm for my sale and purchase conveyancing who has been great in the past when i have used them for other things and we will be porting our current mortgage which is with a big high st branch so I would assume they have plenty of in house legal staff.

I cant believe how helpful you have all been, many thanks! xx

Your mortgage lender, however large, will appint a solicitor to oversee the transfer of ownership and register the Charge against the new property.


Check that your "local and small firm" is on their panel. If not, either

* ask your firm to apply,

* use a different firm, or

* accspt the issues associated with using a different solicitor to your lender.