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  • FIRST POST
    • makkan00
    • By makkan00 26th Mar 18, 10:48 AM
    • 22Posts
    • 0Thanks
    makkan00
    Do we incur additional SDLT if we remortgage?
    • #1
    • 26th Mar 18, 10:48 AM
    Do we incur additional SDLT if we remortgage? 26th Mar 18 at 10:48 AM
    Hi all,
    Apologies in advance if this has been covered. I have been researching this for one week and could not find the reasonable answer.

    I have spoken to HMRC and they said that they do not provide legal advice and they can only guide to 'guidance'.

    I have spoken to our previous solicitor and they suggested to contact HMRC, whereas HMRC says to contact solicitors, so I am going in circles.

    I will try and explain the situation.

    So, the Scenario is:

    Property A: Flat with the value of 200000 and joint property b.w me and mrs. This is our residential property. Outstanding mortgage is £140K on this.

    Property B: A house with the current value of 350K and only on my name. This is BTL property and the outstanding mortgage is 250K. I am the sole owner of this property. Unfortunately, we bought this property after April 2016 and I had to pay additional 3% SDLT as a landlord.

    What we want to do is, make Property B into residential property and Property A into BTL mortgage.

    However, in doing so, we cannot get the residential mortgage only on my name for property B due to the outstanding mortgage of £250k and I will have to include the Mrs into the mortgage application for property B.

    Now, as I am adding the Mrs to deed and mortgage, do I/we incur additional SDLT considering that I have already paid additional 3% SDLT in 2016?

    This is where the confusion is.

    Reading HMRC guidelines, and looking at example 2;
    https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property

    It appears that SDLT will be applicable to the outstanding mortgage if it does. And if that is the case, then 250K (outstanding mortgage) divided by two = £125K.

    Now, on £125K there should be no SDLT which she should pay, as this will become our residential property and not BTL mortgage. We may incur £3750 (for £125K share of mrs) if this is considered as additional property.


    Can someone help to figure out the answer? or who should be the best person to go for legal advice?

    Thanks.

    PS: Also, please bear in mind that the purpose of this post is to establish the right amount of SDLT if applicable and not to avoid it.
Page 1
    • pinklady21
    • By pinklady21 26th Mar 18, 11:29 AM
    • 526 Posts
    • 356 Thanks
    pinklady21
    • #2
    • 26th Mar 18, 11:29 AM
    • #2
    • 26th Mar 18, 11:29 AM
    Would asking the lender of property A for consent to let help at all? You would then be able to keep the residential mortgage on it, and let it out.
    • SDLT Geek
    • By SDLT Geek 26th Mar 18, 12:42 PM
    • 200 Posts
    • 125 Thanks
    SDLT Geek
    • #3
    • 26th Mar 18, 12:42 PM
    Autumn Budget changes might save you if married
    • #3
    • 26th Mar 18, 12:42 PM
    You refer to your partner as "Mrs". Are the two of you married? If so it sounds as if you are saved from the higher rates of SDLT by changes brought in with effect from 22 November 2017 in the Autumn Budget. One of the changes is to take out of the higher rates of SDLT simple transfers between spouses.

    I agree that if she takes a half share in the property the "chargeable consideration" is £125K, so no regular SDLT if the higher rates do not apply, though a return will be needed.


    If you are not married then it seems likely that 3% SDLT would be due on the £125K. It would be on less if you transfer her a smaller proportion of the property.
    • makkan00
    • By makkan00 26th Mar 18, 6:37 PM
    • 22 Posts
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    makkan00
    • #4
    • 26th Mar 18, 6:37 PM
    • #4
    • 26th Mar 18, 6:37 PM
    You refer to your partner as "Mrs". Are the two of you married? If so it sounds as if you are saved from the higher rates of SDLT by changes brought in with effect from 22 November 2017 in the Autumn Budget. One of the changes is to take out of the higher rates of SDLT simple transfers between spouses.

    I agree that if she takes a half share in the property the "chargeable consideration" is £125K, so no regular SDLT if the higher rates do not apply, though a return will be needed.


    If you are not married then it seems likely that 3% SDLT would be due on the £125K. It would be on less if you transfer her a smaller proportion of the property.
    Originally posted by SDLT Geek
    Many thanks for your valuable input. We are married.

    I did not get this part of your reply 'so no regular SDLT if the higher rates do not apply, though a return will be needed'.

    If we are married, no SDLT will be applied?
    Am I correct?

    When you say a return is needed, you mean 'filling in the form and returning it'?
    • SDLT Geek
    • By SDLT Geek 26th Mar 18, 8:45 PM
    • 200 Posts
    • 125 Thanks
    SDLT Geek
    • #5
    • 26th Mar 18, 8:45 PM
    • #5
    • 26th Mar 18, 8:45 PM
    To clarify my comment: once you get to the conclusion that the higher rates of SDLT are not due the question is whether SDLT at the regular rates is due. SDLT at regular rates starts over £125k. So with a chargeable consideration of exactly £125k no SDLT is due.

    But yes, a land transaction return is needed. Normally a conyeyancer draws this up, the buyer signs it and the conveyancing files it electronically.
    • makkan00
    • By makkan00 27th Mar 18, 9:00 AM
    • 22 Posts
    • 0 Thanks
    makkan00
    • #6
    • 27th Mar 18, 9:00 AM
    • #6
    • 27th Mar 18, 9:00 AM
    To clarify my comment: once you get to the conclusion that the higher rates of SDLT are not due the question is whether SDLT at the regular rates is due. SDLT at regular rates starts over £125k. So with a chargeable consideration of exactly £125k no SDLT is due.

    But yes, a land transaction return is needed. Normally a conyeyancer draws this up, the buyer signs it and the conveyancing files it electronically.
    Originally posted by SDLT Geek
    Many thanks for your help.
    • makkan00
    • By makkan00 29th Mar 18, 7:23 PM
    • 22 Posts
    • 0 Thanks
    makkan00
    • #7
    • 29th Mar 18, 7:23 PM
    • #7
    • 29th Mar 18, 7:23 PM
    To clarify my comment: once you get to the conclusion that the higher rates of SDLT are not due the question is whether SDLT at the regular rates is due. SDLT at regular rates starts over £125k. So with a chargeable consideration of exactly £125k no SDLT is due.

    But yes, a land transaction return is needed. Normally a conyeyancer draws this up, the buyer signs it and the conveyancing files it electronically.
    Originally posted by SDLT Geek
    Thanks for your help. Just consulted two different solicitors and conclusion is that higher SDLT will be applicable. As this property will make my Mrs an owner of the 2nd property, therefore SDLT will be applicable at a higher rate.

    I hope it will help others.
    • SDLT Geek
    • By SDLT Geek 30th Mar 18, 6:27 AM
    • 200 Posts
    • 125 Thanks
    SDLT Geek
    • #8
    • 30th Mar 18, 6:27 AM
    • #8
    • 30th Mar 18, 6:27 AM
    I wonder if you referred the other solicitors to the Budget changes of 22 November 2017 which save transfers between spouses? They would not give you the right answer if they did not now of those!

    The pdf guidance of November 2016 had not been updated for those budget changes, though HMRC are in the process of updating the guidance to release as pages of their manual.

    The 3% surcharge has got so complicated that many solicitors do not understand it!
    • makkan00
    • By makkan00 3rd Apr 18, 8:06 AM
    • 22 Posts
    • 0 Thanks
    makkan00
    • #9
    • 3rd Apr 18, 8:06 AM
    • #9
    • 3rd Apr 18, 8:06 AM
    Many thanks mate.
    I’ve informed them about it and I doubt that they knew it.
    Giving them a hint didn’t change their response and their reply was ’yes, additional SDLT is applicable.’
    • SDLT Geek
    • By SDLT Geek 3rd Apr 18, 4:36 PM
    • 200 Posts
    • 125 Thanks
    SDLT Geek
    I would keep at them until they give you the legally correct answer. It is black letter law. Do you want me to give you the references to the statutory provisions to pass on to them?

    It really is not rocket science!
    • makkan00
    • By makkan00 3rd Apr 18, 7:34 PM
    • 22 Posts
    • 0 Thanks
    makkan00
    I would keep at them until they give you the legally correct answer. It is black letter law. Do you want me to give you the references to the statutory provisions to pass on to them?

    It really is not rocket science!
    Originally posted by SDLT Geek
    Many thanks for being kind mate. It will be great if you can provide the references so I can pass it on.

    Many thanks.
    • getmore4less
    • By getmore4less 4th Apr 18, 8:20 AM
    • 31,906 Posts
    • 19,124 Thanks
    getmore4less
    this should get you started.
    https://www.gov.uk/government/publications/stamp-duty-land-tax-higher-rates-minor-amendments/stamp-duty-land-tax-higher-rates-minor-amendments
    • SDLT Geek
    • By SDLT Geek 4th Apr 18, 1:16 PM
    • 200 Posts
    • 125 Thanks
    SDLT Geek
    Yes, that guidance will help. The provisions themselves are a new paragraph 9A added into Finance Act 2003 / Schedule 4ZA.


    The addition is to be made permanently by the Finance Bill Schedule 11 / paragraph 4. It is presently in force by virtue of the Budget Resolutions passed just after the 22 November 2017 Budget.
    • makkan00
    • By makkan00 5th Apr 18, 9:11 AM
    • 22 Posts
    • 0 Thanks
    makkan00
    Yes, that guidance will help. The provisions themselves are a new paragraph 9A added into Finance Act 2003 / Schedule 4ZA.


    The addition is to be made permanently by the Finance Bill Schedule 11 / paragraph 4. It is presently in force by virtue of the Budget Resolutions passed just after the 22 November 2017 Budget.
    Originally posted by SDLT Geek
    Many thanks mate. Time to read it thoroughly and pass this onto the solicitors.
    • SDLT Geek
    • By SDLT Geek 7th Apr 18, 10:21 AM
    • 200 Posts
    • 125 Thanks
    SDLT Geek
    Amendments now passed in Finance Act 2018
    Yes, that guidance will help. The provisions themselves are a new paragraph 9A added into Finance Act 2003 / Schedule 4ZA.


    The addition is to be made permanently by the Finance Bill Schedule 11 / paragraph 4. It is presently in force by virtue of the Budget Resolutions passed just after the 22 November 2017 Budget.
    Originally posted by SDLT Geek
    I see that the Finance Act 2018 received Royal Assent on 15 March 2018 so now is in force in place of the Budget Resolutions. The provision you are interested in is at Schedule 11 / paragraph 4.
    • makkan00
    • By makkan00 16th Apr 18, 8:26 AM
    • 22 Posts
    • 0 Thanks
    makkan00
    I see that the Finance Act 2018 received Royal Assent on 15 March 2018 so now is in force in place of the Budget Resolutions. The provision you are interested in is at Schedule 11 / paragraph 4.
    Originally posted by SDLT Geek
    Many thanks.

    One more question, do you know any rule which suggests that a person can get the refund on SDLT if that person had paid additional 3% on the property in the last 2 years.
    However, now the property is being made as a residential property?

    Thanks.
    • SDLT Geek
    • By SDLT Geek 16th Apr 18, 8:09 PM
    • 200 Posts
    • 125 Thanks
    SDLT Geek
    There are a number of situations where the 3% surcharge can be recovered including:

    (a) Where it was not due in the first place. For example someone buys a property to rent it out, but owned no other properties at the time.

    (b) Where the property was bought with the intention of living in it but a previous home is retained then sometimes the 3% surcharge is payable but is recoverable if the old home is sold within three years.
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