Who has to pay SDLT in these situations?

RugbyTry

Father owns property 1 worth 600k. Property 2, worth 450k, is owned in equal shares by Son 1, Son 2 and Daughter. No mortgages on the properties and both properties are their main home. 

What SDLT is liable in each of the two scenario's:

Scenario 1: Father gifts property 1 to Son 1 and Father buys 1/3 share of property 2 from Son 2 for 150k.

Scenario 2: Father gifts property 1 to Son 1,  Son 1 gifts his 1/3 share of property 2 to his Father and Father buys 1/3 share of property 2 from Son 2 for 150k.

I believe that the Father will have to pay SDLT on buying the 1/3 share from Son 2 but what about the gifts?

Keep_pedalling

The big question is why would he be crazy enough to give his home away. Assuming he is going to carry on living there this will be a gift with reservation of benefit, so the main tax issues as far as the gift is concerned will be IHT and CGT. 

user1977

Yes, leaving aside the SDLT, I'm wondering why they're doing this. Is anybody moving house?

Also bear in mind that while genuine gifts are SDLT-free, they're not "gifts" if something is being given in return (otherwise everybody would just "gift" the price of the house and coincidentally receive the "gift" of a house...).

_Penny_Dreadful

RugbyTry said:

Father owns property 1 worth 600k. Property 2, worth 450k, is owned in equal shares by Son 1, Son 2 and Daughter. No mortgages on the properties and both properties are their main home. 

What SDLT is liable in each of the two scenario's:

Scenario 1: Father gifts property 1 to Son 1 and Father buys 1/3 share of property 2 from Son 2 for 150k.

Scenario 2: Father gifts property 1 to Son 1,  Son 1 gifts his 1/3 share of property 2 to his Father and Father buys 1/3 share of property 2 from Son 2 for 150k.

I believe that the Father will have to pay SDLT on buying the 1/3 share from Son 2 but what about the gifts?

When you say both properties are their main home do you mean that father lives in property 1 and the sons and daughter live in property 2?  If so then...

Scenario 1

No SDLT due on the gifting of property 1 to son 1 as, if it's truly a no-strings-attached-gift, the consideration paid is zero therefore the SDLT due is also zero.

The £150,000 paid by father to son 2 for 1/3 of property 2 would attract SDLT.  How much would depend on whether the share of property 2 counts as a share of an additional residential property for father.  Father is looking at a SDLT bill for either £500 or £8,000.

Scenario 2

Father is not gifting property 1 to son 1 because father will only give son 1 property 1 in exchange for a 1/3 share of property 2.  Son 1 will need to pay SDLT on the consideration paid for property 1 i.e. the market value of his 1/3 of property 2.  Father will also need to pay SDLT on the consideration paid for son 1's 1/3 share of property 2.

Father's purchase of son 2's 1/3 share of property 2 will also attract SDLT.

What is father trying to achieve?

RugbyTry

Hi everyone,

Sorry if my original post was not clear. Property 1 is the father's only residence and property 2 is the only sole residence owned in equal 1/3 shares by son 1, son 2 and daughter. The father wishes to gift property 1 to son 1. Son 1 will move into property 1 and father will move out and live with his daughter in property 2.