Stamp Duty Consideration Question

saajan_12

twilightzone said:

Hi there,
Can someone please advise me on this, as i seem to have read conflicting information.
My mother wants to downsize and is transferring her house to me, it is valued at £220,000 and I plan to raise a 'buy to let' ( or rather 'let to buy' to be precise ) - so mum 'gifts' you a house
I will then be buying a flat valued at £120,000  for my mother with the mortgage raised, and also a little extra for improvements  to make it more liveable for her. So £150,000 mortgage. - so you 'gift' mum 150k cash (to buy and renovate a a flat, reading your next reply too)
HMRC would not believe those are gifts, but consideration. So 
(a) you buy house for 150k -> SDLT @ additional rate on 150k = 5k (or more after the holiday)
(b) mum buys house for 120k -> SDLT @ standard rate on 120k = £0
She would not be paying me any rent, i would instead be receiving rental income from the house gifted to me.- of course she wouldn't pay rent because she will be living in her own flat.

Now, my understanding was that i would pay Stamp Duty of 3% on the purchase of the flat, and nothing for receiving my mothers house as there was no consideration. - no, you're not buying the flat. You're buying the house (though only paying 150k not 220k, so SDLT is on 150k)

However, a mortgage broker seems to disagree with this and has suggested I would need to pay stamp duty on the market value of my mothers property and not the purchase price, as that value is being used as the purchase price for mortgage purposes in order to get a £150,000 mortgage.- no, SDLT is not based on market value. 

Hope this makes sense!

Thankyou
 

twilightzone said:

Sorry, just to add.
The Flat would be in my mums name even though i'm buying it, maybe that matters.. maybe not.

You're not involved in the flat, as it will be in mum's name.
A gift in return for a gift is consideration, in the amount of cash you give mum (whether raised by mortgage or not). So that's 150k paid for the house -> SDLT payable at additional rate on 150k consideration for the house. 

twilightzone

saajan_12 said:

twilightzone said:

Hi there,
Can someone please advise me on this, as i seem to have read conflicting information.
My mother wants to downsize and is transferring her house to me, it is valued at £220,000 and I plan to raise a 'buy to let' ( or rather 'let to buy' to be precise ) - so mum 'gifts' you a house
I will then be buying a flat valued at £120,000  for my mother with the mortgage raised, and also a little extra for improvements  to make it more liveable for her. So £150,000 mortgage. - so you 'gift' mum 150k cash (to buy and renovate a a flat, reading your next reply too)
HMRC would not believe those are gifts, but consideration. So 
(a) you buy house for 150k -> SDLT @ additional rate on 150k = 5k (or more after the holiday)
(b) mum buys house for 120k -> SDLT @ standard rate on 120k = £0
She would not be paying me any rent, i would instead be receiving rental income from the house gifted to me.- of course she wouldn't pay rent because she will be living in her own flat.

Now, my understanding was that i would pay Stamp Duty of 3% on the purchase of the flat, and nothing for receiving my mothers house as there was no consideration. - no, you're not buying the flat. You're buying the house (though only paying 150k not 220k, so SDLT is on 150k)

However, a mortgage broker seems to disagree with this and has suggested I would need to pay stamp duty on the market value of my mothers property and not the purchase price, as that value is being used as the purchase price for mortgage purposes in order to get a £150,000 mortgage.- no, SDLT is not based on market value. 

Hope this makes sense!

Thankyou
 

twilightzone said:

Sorry, just to add.
The Flat would be in my mums name even though i'm buying it, maybe that matters.. maybe not.

You're not involved in the flat, as it will be in mum's name.
A gift in return for a gift is consideration, in the amount of cash you give mum (whether raised by mortgage or not). So that's 150k paid for the house -> SDLT payable at additional rate on 150k consideration for the house. 

Yeah, that would make sense.. However, the lender wanted to put it through at market value so i would need to pay SDLT on the full 220k

user1977

twilightzone said:

saajan_12 said:

twilightzone said:

Hi there,
Can someone please advise me on this, as i seem to have read conflicting information.
My mother wants to downsize and is transferring her house to me, it is valued at £220,000 and I plan to raise a 'buy to let' ( or rather 'let to buy' to be precise ) - so mum 'gifts' you a house
I will then be buying a flat valued at £120,000  for my mother with the mortgage raised, and also a little extra for improvements  to make it more liveable for her. So £150,000 mortgage. - so you 'gift' mum 150k cash (to buy and renovate a a flat, reading your next reply too)
HMRC would not believe those are gifts, but consideration. So 
(a) you buy house for 150k -> SDLT @ additional rate on 150k = 5k (or more after the holiday)
(b) mum buys house for 120k -> SDLT @ standard rate on 120k = £0
She would not be paying me any rent, i would instead be receiving rental income from the house gifted to me.- of course she wouldn't pay rent because she will be living in her own flat.

Now, my understanding was that i would pay Stamp Duty of 3% on the purchase of the flat, and nothing for receiving my mothers house as there was no consideration. - no, you're not buying the flat. You're buying the house (though only paying 150k not 220k, so SDLT is on 150k)

However, a mortgage broker seems to disagree with this and has suggested I would need to pay stamp duty on the market value of my mothers property and not the purchase price, as that value is being used as the purchase price for mortgage purposes in order to get a £150,000 mortgage.- no, SDLT is not based on market value. 

Hope this makes sense!

Thankyou
 

twilightzone said:

Sorry, just to add.
The Flat would be in my mums name even though i'm buying it, maybe that matters.. maybe not.

You're not involved in the flat, as it will be in mum's name.
A gift in return for a gift is consideration, in the amount of cash you give mum (whether raised by mortgage or not). So that's 150k paid for the house -> SDLT payable at additional rate on 150k consideration for the house. 

Yeah, that would make sense.. However, the lender wanted to put it through at market value so i would need to pay SDLT on the full 220k

Maybe some confusion but the mortgage lender's opinion about the value of the property or how they interpret the overall circumstances shouldn't affect the content of your SDLT return - the lenders ought only to care that there is a valid SDLT return submitted (and that's left to the solicitors to check), not what you've stated the consideration as in the return. The lenders will (separately) make their own assessment about the value of the property and whether they're happy to accept the "gifted" proportion of it.

stig

I think your conveyancer may be looking at the rules for house exchanges - when one property is swapped for another,  SDLT is due on the market value of each property. In your case, your mum is giving you a  house and you’re giving her a flat. I can see why they think the exchange rules apply. They may not, depending on the order of transactions, but I would look at the rules if I were you.

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm01410

Stig

twilightzone

user1977 said:

twilightzone said:

saajan_12 said:

twilightzone said:

Hi there,
Can someone please advise me on this, as i seem to have read conflicting information.
My mother wants to downsize and is transferring her house to me, it is valued at £220,000 and I plan to raise a 'buy to let' ( or rather 'let to buy' to be precise ) - so mum 'gifts' you a house
I will then be buying a flat valued at £120,000  for my mother with the mortgage raised, and also a little extra for improvements  to make it more liveable for her. So £150,000 mortgage. - so you 'gift' mum 150k cash (to buy and renovate a a flat, reading your next reply too)
HMRC would not believe those are gifts, but consideration. So 
(a) you buy house for 150k -> SDLT @ additional rate on 150k = 5k (or more after the holiday)
(b) mum buys house for 120k -> SDLT @ standard rate on 120k = £0
She would not be paying me any rent, i would instead be receiving rental income from the house gifted to me.- of course she wouldn't pay rent because she will be living in her own flat.

Now, my understanding was that i would pay Stamp Duty of 3% on the purchase of the flat, and nothing for receiving my mothers house as there was no consideration. - no, you're not buying the flat. You're buying the house (though only paying 150k not 220k, so SDLT is on 150k)

However, a mortgage broker seems to disagree with this and has suggested I would need to pay stamp duty on the market value of my mothers property and not the purchase price, as that value is being used as the purchase price for mortgage purposes in order to get a £150,000 mortgage.- no, SDLT is not based on market value. 

Hope this makes sense!

Thankyou
 

twilightzone said:

Sorry, just to add.
The Flat would be in my mums name even though i'm buying it, maybe that matters.. maybe not.

You're not involved in the flat, as it will be in mum's name.
A gift in return for a gift is consideration, in the amount of cash you give mum (whether raised by mortgage or not). So that's 150k paid for the house -> SDLT payable at additional rate on 150k consideration for the house. 

Yeah, that would make sense.. However, the lender wanted to put it through at market value so i would need to pay SDLT on the full 220k

Maybe some confusion but the mortgage lender's opinion about the value of the property or how they interpret the overall circumstances shouldn't affect the content of your SDLT return - the lenders ought only to care that there is a valid SDLT return submitted (and that's left to the solicitors to check), not what you've stated the consideration as in the return. The lenders will (separately) make their own assessment about the value of the property and whether they're happy to accept the "gifted" proportion of it.

I see, thankyou. very much
I just wanted to check if what they were saying was correct, i think they were suggesting it would be tax avoidance otherwise and the guy was 99.9% sure it was the full market value to take into consideration for Stamp Duty
I wouldn't have been surprised if it was the case, they would tax the air you breathe if they could.   it just didn't makes any sense to me...

Thankyou for all the replies