SDLT/Tax question

mat1964

My property issues are described in the waiting to exchange thread, but I have some specific questions, so starting a new thread.

My GF and I were both selling our houses and buying a new build.  It seems her sale has fallen through, so I am applying for a mortgage to cover the difference whilst she re-lists.  As we are buying a new build, they won't extend our exchange deadline for too much longer.  If we do a sole mortgage, then it will only be me on the title deed and therefore once she's sold her place, SDLT would be payable to transfer her onto the deed.  It's not possible to apply for a joint mortgage as she has some old mortgage defaults from her previous marriage.  So a couple of questions are:

- If we exchange with just me on the contract, but she manages to sell her house after we exchange but before completion and we don't need the mortgage, can we get her on the title deed on completion, so avoiding the additional SDLT liability

- If that is not possible, and we complete with the mortgage, can she repay the mortgage but not go on the title deed without tax implications (so essentially she would gift me the money but not become an owner).  

TBagpuss

I am not sure on the first but on the second, yes - and you and she ought to do a declaration of trust to set out that while you are the legal owner, she has a beneficial interest in the property.
Normally, a lender will require that the mortgage be in the names of the people or(or person) who are (or is) the legal owner, so I doubt that you would be able to have the property in joint names if the mortgage is in your sole name, in any event.

mat1964

TBagpuss said:

I am not sure on the first but on the second, yes - and you and she ought to do a declaration of trust to set out that while you are the legal owner, she has a beneficial interest in the property.
Normally, a lender will require that the mortgage be in the names of the people or(or person) who are (or is) the legal owner, so I doubt that you would be able to have the property in joint names if the mortgage is in your sole name, in any event.

thank you.  Yes no chance of sole mortgage and getting her on the title deed.

SDLT_Geek

mat1964 said:

My property issues are described in the waiting to exchange thread, but I have some specific questions, so starting a new thread.

My GF and I were both selling our houses and buying a new build.  It seems her sale has fallen through, so I am applying for a mortgage to cover the difference whilst she re-lists.  As we are buying a new build, they won't extend our exchange deadline for too much longer.  If we do a sole mortgage, then it will only be me on the title deed and therefore once she's sold her place, SDLT would be payable to transfer her onto the deed.  It's not possible to apply for a joint mortgage as she has some old mortgage defaults from her previous marriage.  

It can confuse the issues for SDLT to talk about who will be "on the title deed".  What matters for SDLT is the underlying beneficial ownership.  So the property could be acquired with OP as the sole registered proprietor, but if GF has a beneficial share (by virtue of providing part of the price and / or under a declaration of trust) then OP and GF are joint buyers for SDLT purposes. 
If GF has not sold her home, then that would mean the 3% extra SDLT is due at completion, though I would expect it would be recoverable when she sells her previous home.

So a couple of questions are:
- If we exchange with just me on the contract, but she manages to sell her house after we exchange but before completion and we don't need the mortgage, can we get her on the title deed on completion, so avoiding the additional SDLT liability

If the contract envisages OP as sole beneficial owner, but at completion OP and GF are to be joint beneficial owners, then it should be possible to escape the extra 3% as each of OP and GF will have completed the sale of your previous homes.   Care would have to be taken as to how it is done.

- If that is not possible, and we complete with the mortgage, can she repay the mortgage but not go on the title deed without tax implications (so essentially she would gift me the money but not become an owner).  

If GF is not in the first instance a beneficial owner, but pays off part of OP's debt to become a beneficial owner, then dependent on the figures involved, there could be SDLT due from GF.

I take with a pinch of salt the suggestion GF "gifts" OP the money!!

SDLT_Geek

TBagpuss said:

I am not sure on the first but on the second, yes - and you and she ought to do a declaration of trust to set out that while you are the legal owner, she has a beneficial interest in the property.

If GF is to have a beneficial interest in the property, then if she still owns her previous home, the extra 3% SDLT will be due on the purchase.

mat1964

SDLT_Geek said:

If GF is to have a beneficial interest in the property, then if she still owns her previous home, the extra 3% SDLT will be due on the purchase.

thanks for the replies.  Very helpful. Some questions:
- If my GF has sold her home in time for completion on 1/9, so we don't need the mortgage, you seem to be saying that we will still be joint buyers for SDLT purposes and therefore we can transfer into her name after completion with no further SDLT?

-   If she has not sold her house, and if we don't have any legal agreement at that point, and she would not have contributed at all, then the additional 3% would not be payable?

- If I buy on my own using a mortgage in my name - without any legal agreement with my GF and at some point in the future my GF gives me the money to pay off the mortgage, then I assume from your reply that SDLT would be payable at that point regardless of whether we have an agreement or not.  She can't just gift me the money (I noted your comment on that)?  If so, would it be payable only on the amount she is contributing?

SDLT_Geek

mat1964 said:

thanks for the replies.  Very helpful. Some questions:
- If my GF has sold her home in time for completion on 1/9, so we don't need the mortgage, you seem to be saying that we will still be joint buyers for SDLT purposes and therefore we can transfer into her name after completion with no further SDLT?
Would it not be best in this scenario to acquire the property in joint names at completion with both being entitled to the beneficial interest as recorded in a declaration of trust?  Why add extra steps?
-   If she has not sold her house, and if we don't have any legal agreement at that point, and she would not have contributed at all, then the additional 3% would not be payable?
If she has no underlying share in the new property, then because OP has sold OP's former home and is the sole owner of the new one, then I would not expect the extra 3% to be due.
- If I buy on my own using a mortgage in my name - without any legal agreement with my GF and at some point in the future my GF gives me the money to pay off the mortgage, then I assume from your reply that SDLT would be payable at that point regardless of whether we have an agreement or not.  She can't just gift me the money (I noted your comment on that)?  If so, would it be payable only on the amount she is contributing?

I would expect the "chargeable consideration" for her acquisition from OP of a share in the property to be the amount she pays, whether to OP or to discharge OP's debts.

mat1964

SDLT_Geek said:

Would it not be best in this scenario to acquire the property in joint names at completion with both being entitled to the beneficial interest as recorded in a declaration of trust?  Why add extra steps?
-

Yes this would be the best thing - however, if she has not sold her house, we would be liable for an extra £25k SDLT on completion and whilst it may be refundable, it's not something we just have sitting about as we're already stretched.