Stamp Duty Confusion

John_G66

Hopefully someone could help on this?
My son and I have a joint mortgage on a property. He came in on the mortgage to help me purchase a property after divorce. My son is now looking to exit the mortgage to buy a property with his girlfriend and I am now in a position to have a mortgage on my own. I'm now going through the legal process of my son being removed from the deeds and mortgage. The solicitor has said that I may be liable for stamp duty but I don't think this is correct as stamp duty was paid on the property 3 years ago when it was purchased, certainly doesn't feel fair!! Can anyone help?

p00hsticks

As I understand it (but I'm not an expert)  your son will be basically gifting you his half of the property and as you are connected parties the transaction is considered as being effectively a sale at market value, so stamp duty may be due from you. If your son was not living in the property during the time his name was on the deeds he may be liable to capital gains tax on any increase in the value of the property over that period. 

RAS

Are you buying your son out for a consideration? Or is this a nil price transaction?

saajan_12

OP, what are the numbers involved? Due to how the bandings work, SDLT can be quite low when its just a % of the property being transferred. Numbers needed are:
- property value
- mortgage balance
- son's share %
- are you paying son any £ for his equity? 

p00hsticks said:

As I understand it (but I'm not an expert)  your son will be basically gifting you his half of the property and as you are connected parties the transaction is considered as being effectively a sale at market value, so stamp duty may be due from you. If your son was not living in the property during the time his name was on the deeds he may be liable to capital gains tax on any increase in the value of the property over that period. 

Nonsense advise on many fronts
- its not a gift if the son is also coming off the mortgage, as effectively the son is paid a % of the mortgage balance. 
- If it was a gift, then connected parties is irrelevant, stamp duty is based on the consideration. 

SDLT_Geek

saajan_12 said:

OP, what are the numbers involved? Due to how the bandings work, SDLT can be quite low when its just a % of the property being transferred. Numbers needed are:
- property value
- mortgage balance
- son's share %
- are you paying son any £ for his equity? 

p00hsticks said:

As I understand it (but I'm not an expert)  your son will be basically gifting you his half of the property and as you are connected parties the transaction is considered as being effectively a sale at market value, so stamp duty may be due from you. If your son was not living in the property during the time his name was on the deeds he may be liable to capital gains tax on any increase in the value of the property over that period. 

Nonsense advise on many fronts
- its not a gift if the son is also coming off the mortgage, as effectively the son is paid a % of the mortgage balance. 
- If it was a gift, then connected parties is irrelevant, stamp duty is based on the consideration. 

Good points here.  One point of particular relevance is he son's share in the property.  It is worth looking out what was documented at the time, as it might be that there is a declaration of trust confirming he has no share in the property, or a very small share, but was named as a registered proprietor just as a trustee and to enable the borrowing to go through.  If the son had no beneficial interest in the property, then there is no chargeable interest for OP to acquire.

We are assuming the property is in England, so the relevant stamp duty is stamp duty land tax.  Is that right?

John_G66

Thanks for the advice. My son will not be taking any cash or equity but he gets the house on my death. Bought the property for 250 k and owe 200k on the mortgage, property is worth circa 310k.

sheramber

What share of the house does he have?

Is it 50/50 or another arrangement? 

Grumpy_chap

John_G66 said:

Hopefully someone could help on this?
My son and I have a joint mortgage on a property. He came in on the mortgage to help me purchase a property after divorce. My son is now looking to exit the mortgage to buy a property with his girlfriend and I am now in a position to have a mortgage on my own. I'm now going through the legal process of my son being removed from the deeds and mortgage. The solicitor has said that I may be liable for stamp duty but I don't think this is correct as stamp duty was paid on the property 3 years ago when it was purchased, certainly doesn't feel fair!! Can anyone help?

One thing to consider here is it sounds like your son will have lost any FTB status with respect to SDLT.

If he retains any equity, he may be liable for higher rate SDLT surcharge.

If he sells the equity he currently has, the son may be liable for CGT.

If you buy the portion of the property from your son, you may be liable for SDLT.

saajan_12

John_G66 said:

Thanks for the advice. My son will not be taking any cash or equity but he gets the house on my death. Bought the property for 250 k and owe 200k on the mortgage, property is worth circa 310k.

Okay so if the property is split 50/50 then:
- Son currently owns an asset worth 155k with a loan of 100k
- If it signs it over to you, then you're taking on son's half of the mortgage worth 100k. 
0 Effectively you're buying half the property for 100k, so SDLT is due on this amount. 
- 100k is below the lowest SDLT threshold, so your SDLT on this transfer is £0. 
- Son will have a separate SDLT at normal (non FTB) rates when he purchases with his partner. 

So the solicitor is right that it MAY be payable because there is a consideration, but in this case its below the threshold.