Transfer of Equity - Costs, Taxes, Stamp Duty

wrongsideof40

Hello - I wonder if anyone can advise. FYI - My wife and I co-own a property. This question is about my daughter's property, which (on paper) my daughter and I co-own. Years ago, the only way for my daughter to get a mortgage was for her to jointly apply, with me. For this to happen, I was required to have my name added to the house deeds.

I have no financial interest in the property, and over the years, my daughter has paid her mortgage repayments, without help from me. Due to my age, the term of the joint mortgage was necessarily short and the monthly repayments, quite high.

Now she would like some more disposable income so she wants to remortgage with a more lengthy term and lower repayments. To do that, I need to come off the deeds/mortgage. I believe a Transfer of Equity is required.

The mortgage currently has around £142K outstanding, and looking at recent sales in the area, the property is probably worth around £450K.

The solicitor (in his quote) mentioned Stamp Duty as a potential cost. I don't understand why, as the house is not being bought/sold. No money has or will change hands between my daughter and I.

The solicitor also strongly recommends we take independent tax advice before signing the transfer deed. So my question is, does anyone know if there are tax implications around what my daughter wants to do?

Any help, advice or pointers and much appreciated. Thanks.

SDLT_Geek

https://forums.moneysavingexpert.com/discussion/6671143/transfer-of-equity-costs-taxes-stamp-duty

The key point to understand is whether you have a "beneficial share" in the property. The fact that your name is on the title does not mean that you have a share; it is possible that you and your daughter held as trustees for her alone. If that is the case then she does not acquire an interest in the property and there is no "acquisition" of a share in the property for SDLT purposes.

If in contrast you do have a beneficial share in the property (perhaps set out in a declaration of trust"), then there is indeed a transfer of equity, your daughter is acquiring your share.

Let's say, as an example, that you have a 50% share. We would expect the chargeable consideration to be 50% of the mortgage debt, so £71K. At that level your daughter would have to submit a land transaction return, but there would be no SDLT to pay. (I am assuming the property is in England, is that right?)

Have you thought about capital gains tax? That is more likely to be a problem for you if the property has gone up in value significantly.

silvercar

does your daughter now have sufficient income to get the mortgage on her own?

wrongsideof40

https://forums.moneysavingexpert.com/discussion/comment/82023314#Comment_82023314

@SDLT_Geek

Thanks for taking the time and trouble to get back to me with this advice; much appreciated. I've contacted HMRC and they agree with you that there is no Stamp Duty due. I called HMRC again re Capital Gains Tax and they pointed me to an their online CGT Calculator. Probably about £10K owing. I tried to reason with them that this is a tax on a purely notional 'profit' and the money to be taxed doesn't actually exist. But she wasn't having any. So it looks like we'll have to take that one on the chin; my daughter will add it to the mortgage loan.

I just want to make sure there's no OTHER, unforeseen tax implications that'll come back to bite us, when this goes through.

Thanks again.

wrongsideof40

https://forums.moneysavingexpert.com/discussion/comment/82023663#Comment_82023663

Thankfully, she does :-)