Inherited property; buying out siblings; what is the correct 'consideration' value??

ojb_28

Looking for some advice, please.
My partner's mother passed away and probate was granted in 2018. The estate will be equally shared with her 3 siblings under the terms of the will and my partner will therefore inherit 1/4 of the estate which includes the family home.    My partner and I have agreed with the siblings that we will buy out their share of the family home.and we have engaged a conveyancing solicitor to complete the transaction.  The transaction will involve us paying 3/4 of the agreed house value (in line with current full market of £713k), which will then be distributed equally to the other 3 siblings through the probate case handler

We have been advised by the HMRC SDLT helpline that the SDLT will be based on the transaction money paid - i.e. 3/4 of the house value.  However, our conveyancing solicitor has already sent the TR1 land registry form to the seller (the estate of the deceased) with the full value of the house listed as the 'consideration value' in panel 8 of the TR1 form.  We are concerned that this may not be correct and may have an impact on the Stamp Duty we end up paying.  HMRC helpline also advised that a SDLT1 form will also need to be completed (we have yet to see this from our conveyancer).  We are becoming increasingly concerned that our conveyancing solicitor may not be recording the transaction correctly which will have consequences for the stamp duty due and may also have consequences for the capital gains tax for which we will be liable for in the future.

The questions we have are:

1. is the advice we have received from HMRC SDLT helpline correct? - i.e. stamp duty only applies to the money being paid; 3/4 of house value, not full value.  (This I believe is due to the fact that the inherited share that my partner has in the property is exempt from SDLT).
2. what 'consideration' value should be placed in the TR1 Land registry form [at location panel 8]? - 3/4 of the house value?, or the full value?
3. should any additional information be entered in panel 8 of the TR1 form?
4. in the SDLT1 form that follows, what value (consideration) should be placed in Box 10? - does it have to be the same as the consideration value entered in the TR1 form? (If, as I understand it, the SDLT1 form effectively sets the stamp duty tax that will be charged, then the consideration value for the SDLT1 form would be 3/4 of the house value, but this clearly would not match the consideration value already entered by our solicitor in the TR1!)
   

I would very much appreciate any guidance you can offer - thank you.

ojb_28

I realise this is quite a detailed query. Any guidance on any of the points would be most welcome, or a

 recommendation for someone expert in this area to speak with?


Many thanks.

AdrianC

@SDLT_Geek...?

AnotherJoe

So this was three years ago? And nothings been done yet? CGT may be payable by the estate assuming the house has gone up in price a lot in the last few years.
Is there any other money in the rest of the estate which could be traded for the equity to avoid anyone needing to buy anyone out?

Grumpy_chap

Why do you think the inherited share is exempt?
Is this your only property /replacing main home, or is second property rate applicable?

SDLT_Geek

ojb_28 said:

Looking for some advice, please.
My partner's mother passed away and probate was granted in 2018. The estate will be equally shared with her 3 siblings under the terms of the will and my partner will therefore inherit 1/4 of the estate which includes the family home.    My partner and I have agreed with the siblings that we will buy out their share of the family home.and we have engaged a conveyancing solicitor to complete the transaction.  The transaction will involve us paying 3/4 of the agreed house value (in line with current full market of £713k), which will then be distributed equally to the other 3 siblings through the probate case handler

We have been advised by the HMRC SDLT helpline that the SDLT will be based on the transaction money paid - i.e. 3/4 of the house value.  However, our conveyancing solicitor has already sent the TR1 land registry form to the seller (the estate of the deceased) with the full value of the house listed as the 'consideration value' in panel 8 of the TR1 form.  We are concerned that this may not be correct and may have an impact on the Stamp Duty we end up paying.  HMRC helpline also advised that a SDLT1 form will also need to be completed (we have yet to see this from our conveyancer).  We are becoming increasingly concerned that our conveyancing solicitor may not be recording the transaction correctly which will have consequences for the stamp duty due and may also have consequences for the capital gains tax for which we will be liable for in the future.

The questions we have are:

1. is the advice we have received from HMRC SDLT helpline correct? - i.e. stamp duty only applies to the money being paid; 3/4 of house value, not full value.  (This I believe is due to the fact that the inherited share that my partner has in the property is exempt from SDLT).
2. what 'consideration' value should be placed in the TR1 Land registry form [at location panel 8]? - 3/4 of the house value?, or the full value?
3. should any additional information be entered in panel 8 of the TR1 form?
4. in the SDLT1 form that follows, what value (consideration) should be placed in Box 10? - does it have to be the same as the consideration value entered in the TR1 form? (If, as I understand it, the SDLT1 form effectively sets the stamp duty tax that will be charged, then the consideration value for the SDLT1 form would be 3/4 of the house value, but this clearly would not match the consideration value already entered by our solicitor in the TR1!)
   

I would very much appreciate any guidance you can offer - thank you.

There are different ways in which this can be done.

Route 1
OP's partner is first assented out the 1/4 share.  OP and partner can then buy the other 3/4 shares.  That might be from the executors, if those shares have not yet been assented out or from the siblings.  The price could then sensibly be stated as 3/4 of £713K.
Route 2
OP's partner buys the whole of the property from the executors who then divide out the money between the four beneficiaries, so OP's partner "gets back" 1/4 of the price.  Then it would be correct for the TR1 to state the full value of £713K and for the SDLT to be assessed on this figure.

ojb_28

AnotherJoe said:

So this was three years ago? And nothings been done yet? CGT may be payable by the estate assuming the house has gone up in price a lot in the last few years.
Is there any other money in the rest of the estate which could be traded for the equity to avoid anyone needing to buy anyone out?

Thanks Another Joe,

Yes - probate was granted 3 years ago. The property needed work before being marketed, but this has not been since hence we are buying out the siblings to get it moving.

Probate case handler is aware of need for CGT to be paid the increase in value that has occured since death.

There is very little money beyond house value in the estate.

ojb_28

Grumpy_chap said:

Why do you think the inherited share is exempt?
Is this your only property /replacing main home, or is second property rate applicable?

Thank you for your reply, Grumpy_chap.

I researched the .Gov website and found the SDLT Manual. In section SDLTM00570, it refers to FA03/SCH3/PARA3A;

"Acquisition of a property by a person in or towards the satisfaction of his (or her) entitlement under or in relation to the will of a deceased person is exempt from SDLT."

This property is not a main home, so the SDLT that applies will be at the second home rate (hence my wish to secure completion before the end of June).

ojb_28

SDLT_Geek said:

ojb_28 said:

Looking for some advice, please.
My partner's mother passed away and probate was granted in 2018. The estate will be equally shared with her 3 siblings under the terms of the will and my partner will therefore inherit 1/4 of the estate which includes the family home.    My partner and I have agreed with the siblings that we will buy out their share of the family home.and we have engaged a conveyancing solicitor to complete the transaction.  The transaction will involve us paying 3/4 of the agreed house value (in line with current full market of £713k), which will then be distributed equally to the other 3 siblings through the probate case handler

We have been advised by the HMRC SDLT helpline that the SDLT will be based on the transaction money paid - i.e. 3/4 of the house value.  However, our conveyancing solicitor has already sent the TR1 land registry form to the seller (the estate of the deceased) with the full value of the house listed as the 'consideration value' in panel 8 of the TR1 form.  We are concerned that this may not be correct and may have an impact on the Stamp Duty we end up paying.  HMRC helpline also advised that a SDLT1 form will also need to be completed (we have yet to see this from our conveyancer).  We are becoming increasingly concerned that our conveyancing solicitor may not be recording the transaction correctly which will have consequences for the stamp duty due and may also have consequences for the capital gains tax for which we will be liable for in the future.

The questions we have are:

1. is the advice we have received from HMRC SDLT helpline correct? - i.e. stamp duty only applies to the money being paid; 3/4 of house value, not full value.  (This I believe is due to the fact that the inherited share that my partner has in the property is exempt from SDLT).
2. what 'consideration' value should be placed in the TR1 Land registry form [at location panel 8]? - 3/4 of the house value?, or the full value?
3. should any additional information be entered in panel 8 of the TR1 form?
4. in the SDLT1 form that follows, what value (consideration) should be placed in Box 10? - does it have to be the same as the consideration value entered in the TR1 form? (If, as I understand it, the SDLT1 form effectively sets the stamp duty tax that will be charged, then the consideration value for the SDLT1 form would be 3/4 of the house value, but this clearly would not match the consideration value already entered by our solicitor in the TR1!)
   

I would very much appreciate any guidance you can offer - thank you.

There are different ways in which this can be done.

Route 1
OP's partner is first assented out the 1/4 share.  OP and partner can then buy the other 3/4 shares.  That might be from the executors, if those shares have not yet been assented out or from the siblings.  The price could then sensibly be stated as 3/4 of £713K.
Route 2
OP's partner buys the whole of the property from the executors who then divide out the money between the four beneficiaries, so OP's partner "gets back" 1/4 of the price.  Then it would be correct for the TR1 to state the full value of £713K and for the SDLT to be assessed on this figure.

Thank you very much for your reply, SDLT_geek. We believe we are following Route1. The probate solicitor has actioned an "Equitable Transfer" so that the property value has been assented to the 4 beneficiaries, including my partner.  He has also confirmed to the conveyancer the amount for transaction he is expecting is for 3/4 of the value of the property.