SDLT Case Study – Transfer of Equity and Remortgage

Ann Humphrey

July 2016Authorised and Regulated by the Solicitors Regulation Authority SRA Number 76681

This case study on Stamp Duty Land Tax and the transfer of equity & remortgage is based on advice provided to a client in September 2015.

For more case studies covering stamp duty land tax, property tax, business tax and VAT please visit Ann’s website:http://www.annlhumphrey.com/case-studies/

SDLT – Transfer of Equity and Remortgage

July 2016

At the time of publication this case study was technically

accurate however, as tax law and practice change rapidly, you should take specific advice before

taking any action.

Mr A and Miss B, who were not married, wished to rearrange their financial affairs. The main residence which they shared and which had been funded by Mr A, was valued at around £900,000. The existing mortgage was £800,000 and the couple were looking to move it to another lender. The house and the mortgage were both in the name of Miss B. The new lender insisted on both Mr A and Miss B being on the title and taking out the new mortgage so there had to be a transfer of equity.

July 2016

SDLT – Transfer of Equity and Remortgage

At the time of publication this case study was technically

accurate however, as tax law and practice change rapidly, you should take specific advice before

taking any action.

Mr A had the means to repay £200k of the mortgage. The proposal was that Mr A give £200,000 to Miss B to reduce the current mortgage balance to £600,000. On the transfer of the property into joint names and the taking out of the new mortgage, Mr A and Miss B would make a declaration of trust recording that, from that date, the beneficial ownership of the property was 75% Miss B and 25% Mr A.

July 2016

SDLT – Transfer of Equity and Remortgage

At the time of publication this case study was technically

accurate however, as tax law and practice change rapidly, you should take specific advice before

taking any action.

The assumption of a debt is consideration for SDLT purposes by reason of paragraph 8 of Schedule 4 FA 2003. The deemed consideration for SDLT purposes for the transfer of the 25% interest in the property by Miss B to Mr A would be 25% of £600,000, £150,000 (the percentage of the mortgage assumed by Mr A being treated as consideration).

July 2016

SDLT – Transfer of Equity and Remortgage

At the time of publication this case study was technically

accurate however, as tax law and practice change rapidly, you should take specific advice before

taking any action.

The declaration of trust needed to take effect on the transfer into joint names and the gift by Mr A of the £200,000 must not be consideration for the transfer of the 25% share by Miss B. As there would be a small SDLT charge (£500) an SDLT1 (land transaction return) needed to be completed.

July 2016

SDLT – Transfer of Equity and Remortgage

At the time of publication this case study was technically

accurate however, as tax law and practice change rapidly, you should take specific advice before

taking any action.

For more case studies covering stamp duty land tax, property tax, business tax and VAT please visit Ann’s website:

http://www.annlhumphrey.com/case-studies/

SDLT – Transfer of Equity and Remortgage

July 2016

To contact Ann please use this link to send an email:

ann@annlhumphrey.com

Solicitor and tax specialist with over 30 years experience

Areas of expertise: Stamp Duty Land Tax (SDLT), Business Tax and VAT

Set up her own practice after 16 years in the City

Author of ‘VAT and Property’ published in 2015 and co-authored ‘Stamp Duty Land Tax: a practical guide for lawyers’ which is due to be updated in 2016

To visit Ann’s website click here: www.annlhumphrey.com. To send an email please use this link: Send email

About Ann…

Authorised and Regulated by the Solicitors Regulation Authority SRA Number 76681