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SDLT on 'buy out'

including wills and probate
melonfool
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SDLT on 'buy out'

#23527

Postby melonfool » January 16th, 2017, 3:50 pm

Hi

[Ex]partner is buying me out of our jointly owned (tenants in common, 50/50) property - I thought he had to pay Stamp Duty, but this seems to imply not:

https://www.gov.uk/guidance/sdlt-transf ... int-owners

Or does it - I can't make head nor tail of it.

"You don’t pay SDLT if 2 or more people jointly own property (as joint tenants or tenants in common) and you divide it physically and equally and own each part separately. But, if one person takes a bigger share, or all of the other’s share, and pays cash or some other consideration in exchange, you must tell HMRC. If the amount you pay is more than the current threshold, you’ll pay SDLT on it, see example 4."

This says he does:

https://www.theguardian.com/money/2014/ ... to-ex-wife

"when an unmarried couple split up and one of them buys the other out or takes over half the mortgage. So if you had split up without being married, you would have had to pay SDLT of 1% of £150,000."

So - he does. It's only if we held it in another way and divided it (maybe into flats and had one each?) he [we] would not. But in buying me out, he does have to?

(he is suggesting I should pay half, I am suggesting he jog on).

Mel

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Re: SDLT on 'buy out'

#23585

Postby pdnw10 » January 16th, 2017, 7:02 pm

can we assume there is some document that details the common ownership
like a trust or something

is it possible to make changes to this document in one tax year so that say 125K worth is transferred
then in start of next tax year do another 125K
and may be that is enough

that way no SDLT is applicable

also is the property split into flats as there is also multiple dwelling stuff but that is 1% minimum

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Re: SDLT on 'buy out'

#23604

Postby Clitheroekid » January 16th, 2017, 9:31 pm

SDLT is payable if the total consideration exceeds the threshold for residential property, currently £125,000.

I think the confusion's arisen as the consideration isn't just the actual amount being paid in cash. It's also the amount of any debt that's taken on.

So if your house is worth £400,000 with a mortgage of £300,000 you might agree to accept £50,000 from your co-owner for your half of the equity, which would of itself be well under the threshold so no SDLT.

But as he is also taking over responsibility for your half of the mortgage debt (£150,000) the total consideration would be calculated as £50,000 + £150,000 = £200,000, and the transaction would therefore be subject to SDLT at 1%.

And if he also owns an interest in any other property he could get hammered for the additional 3% SDLT.

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Re: SDLT on 'buy out'

#23611

Postby Lootman » January 16th, 2017, 10:07 pm

Clitheroekid wrote:SDLT is payable if the total consideration exceeds the threshold for residential property, currently £125,000.

That's interesting, because I had a similar experience where the property was well over the SDLT threshold (it was about 450K) and no SDLT was determined to be owed.

Now, there were a couple of differences. Firstly this was a good number of years ago, and the rules may have changed since then. And also we were business partners in the property, and neither of us lived there.

Well, OK, a couple of other differences. There was no mortgage. And her share was gifted to me, not sold to me. (There was some consideration that took another form but I don't want to complicate things here).

Anyway, my point is that the solicitor we used for the transaction was very clear that no stamp duty applied. He did however note that, even though the other party gifted me their half, she could potentially have a capital gains tax liability as if it had been sold at fair market value.

I feel sure you are right abut this so I'd assume that one of the differences that I outlined above accounts for the absence of SDLT in my case, and not in Mel's case. Curious which though.

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Re: SDLT on 'buy out'

#23615

Postby Clitheroekid » January 16th, 2017, 10:23 pm

Lootman wrote:And her share was gifted to me, not sold to me.

There is no SDLT payable on gifts, no matter what the value, and that was also the rule when stamp duty was in force.

However, it has to be a`straight' gift, not one that carries a liability to take on debt, otherwise SDLT can kick in.

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Re: SDLT on 'buy out'

#23617

Postby melonfool » January 16th, 2017, 10:27 pm

Clitheroekid wrote:SDLT is payable if the total consideration exceeds the threshold for residential property, currently £125,000.

I think the confusion's arisen as the consideration isn't just the actual amount being paid in cash. It's also the amount of any debt that's taken on.

So if your house is worth £400,000 with a mortgage of £300,000 you might agree to accept £50,000 from your co-owner for your half of the equity, which would of itself be well under the threshold so no SDLT.

But as he is also taking over responsibility for your half of the mortgage debt (£150,000) the total consideration would be calculated as £50,000 + £150,000 = £200,000, and the transaction would therefore be subject to SDLT at 1%.

And if he also owns an interest in any other property he could get hammered for the additional 3% SDLT.


Urgh, he's not going to be happy with that!

So, for clarity - the house is worth £350k. We own as tenants on common 50/50 and there is a deed showing this.

Outstanding mortgage is £65k (ish). So, he needs to give me £175k, and add on the £65k mortgage - so £240k - he pays SDLT on £240k? Oh, no, hang on - it's £175k plus £65k/2? So, not quite so bad.

Just lucky I set the mortgage really short and it's been paid down (gone down £30k in 3.5 years!). Also, he owns no other property (neither of us do).

Thank you!

Mel

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Re: SDLT on 'buy out'

#23619

Postby melonfool » January 16th, 2017, 10:32 pm

pdnw10 wrote:can we assume there is some document that details the common ownership
like a trust or something

is it possible to make changes to this document in one tax year so that say 125K worth is transferred
then in start of next tax year do another 125K
and may be that is enough

that way no SDLT is applicable

also is the property split into flats as there is also multiple dwelling stuff but that is 1% minimum


There is a deed of trust - this is a normal residential house, owned by us together. No flats. Just one single house, that we live in and I will be moving out of.

I'm not waiting til next flippin' tax year to get out of this relationship to avoid c£1k worth of tax! Plus, your suggestion seems to be that I gift him my half of the house. As I need to buy a house and he needs to get a mortgage to buy me out, I can't see how that helps at all (I can't get a mortgage so am reliant on what he offers me). He won't even speak to me and we have to live like this until the transfer is done, so it needs to be got on with (he is currently refusing to agree to the value I have suggested - looks like I'll need to put the house on the market).

Mel

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Re: SDLT on 'buy out'

#23621

Postby AJC5001 » January 16th, 2017, 10:54 pm

melonfool wrote:So, for clarity - the house is worth £350k. We own as tenants on common 50/50 and there is a deed showing this.

Outstanding mortgage is £65k (ish). So, he needs to give me £175k, and add on the £65k mortgage - so £240k - he pays SDLT on £240k? Oh, no, hang on - it's £175k plus £65k/2? So, not quite so bad.

Mel


Well, good luck with that ;)

If the house were sold for £350k, then you paid off the mortgage of £65k, the remaining equity would be £285k, split between two of you. So your half would be £142,500.

Adrian

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Re: SDLT on 'buy out'

#23624

Postby Lootman » January 16th, 2017, 11:09 pm

AJC5001 wrote:If the house were sold for £350k, then you paid off the mortgage of £65k, the remaining equity would be £285k, split between two of you. So your half would be £142,500.

i was told by my solicitor that in these situations, where half of a house is being sold, that the price should be discounted by about 10% or so. The reason for this is that half a house is not as marketable. Since this is a TIC, she could in fact sell her half share to anyone. But it would be worth less to others because the buyer would have to share the house with the ex. I'd do the maths like this:

Subtract the 65K mortgage from the 350K value and we get 285K. Half of that is 142.5K. Then take 10% off that - 128,500.

Given that the SDLT threshold is 125K, that's 1% of 3,500, or just 35 quid!

That assumes that the 350K valuation is AFTER selling costs. If it is before selling costs then the SDLT problem goes away after adjusting for them.

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Re: SDLT on 'buy out'

#23625

Postby AJC5001 » January 16th, 2017, 11:15 pm

Lootman wrote:That assumes that the 350K valuation is AFTER selling costs. If it is before selling costs then the SDLT problem goes away after adjusting for them.


And so does Mel's chance of having enough cash for a new house. :(

Adrian

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Re: SDLT on 'buy out'

#23628

Postby Lootman » January 16th, 2017, 11:19 pm

melonfool wrote:He won't even speak to me and we have to live like this until the transfer is done, so it needs to be got on with (he is currently refusing to agree to the value I have suggested - looks like I'll need to put the house on the market).

I'm fairly sure you cannot put a property onto the market if the co-owner does not agree. And even if you could, do you really want prospective buyers viewing the property with this guy living there and not being co-operative?

There are legal measures that can be taken to force a sale on an unwilling party, but I imagine they are messy and expensive.

I would probably invite him to get his own valuation done. If it is similar to yours then he should accept it, at least if he is sincere about wanting things to move on.

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Re: SDLT on 'buy out'

#23639

Postby PinkDalek » January 17th, 2017, 12:12 am

Lootman wrote:Subtract the 65K mortgage from the 350K value and we get 285K. Half of that is 142.5K. Then take 10% off that - 128,500.


I'm not sure you discount the mortgage to be assumed by the other half, as the full consideration for the half is £65,000. Can anyone confirm one way or the other?

That assumes that the 350K valuation is AFTER selling costs. If it is before selling costs then the SDLT problem goes away after adjusting for them.


Again, isn't SDLT charged on consideration, which would be before (deemed) selling costs?

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Re: SDLT on 'buy out'

#23643

Postby Lootman » January 17th, 2017, 1:09 am

PinkDalek wrote:
Lootman wrote:Subtract the 65K mortgage from the 350K value and we get 285K. Half of that is 142.5K. Then take 10% off that - 128,500.

I'm not sure you discount the mortgage to be assumed by the other half, as the full consideration for the half is £65,000. Can anyone confirm one way or the other?

Yes, I think that was CK''s point and I am sure he's right, as counter-intuitive as that strikes me. So add 32.5K to 128.5K and we get 160K. Take off the 125K nil-rate band and we end up with 1% of 35K, or 350.
PinkDalek wrote:
Lootman wrote:That assumes that the 350K valuation is AFTER selling costs. If it is before selling costs then the SDLT problem goes away after adjusting for them.

Again, isn't SDLT charged on consideration, which would be before (deemed) selling costs?

For CGT I believe the net amount applies but, for SDLT then I feel sure the government writes the rules in whichever way favours them the most, so yeah. On that basis, SDLT is the 350 cited above.

Probably not a deal-breaker assuming that both parties are being reasonable?

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Re: SDLT on 'buy out'

#23648

Postby melonfool » January 17th, 2017, 6:01 am

AJC5001 wrote:
melonfool wrote:So, for clarity - the house is worth £350k. We own as tenants on common 50/50 and there is a deed showing this.

Outstanding mortgage is £65k (ish). So, he needs to give me £175k, and add on the £65k mortgage - so £240k - he pays SDLT on £240k? Oh, no, hang on - it's £175k plus £65k/2? So, not quite so bad.

Mel


Well, good luck with that ;)

If the house were sold for £350k, then you paid off the mortgage of £65k, the remaining equity would be £285k, split between two of you. So your half would be £142,500.

Adrian


Sorry, should have added, the deed is clear that he is responsible for the mortgage and my half is all cash, as I paid my half in cash when we bought. The mortgage obviously had to be joint as the mortgage company wouldn't allow otherwise. But I have to get half the value as cash, he takes on and pays (as he always has done) the remaining mortgage.

If we sold, I would (in essence) get paid first.

Mel

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Re: SDLT on 'buy out'

#23649

Postby melonfool » January 17th, 2017, 6:05 am

Lootman wrote:
melonfool wrote:He won't even speak to me and we have to live like this until the transfer is done, so it needs to be got on with (he is currently refusing to agree to the value I have suggested - looks like I'll need to put the house on the market).

I'm fairly sure you cannot put a property onto the market if the co-owner does not agree. And even if you could, do you really want prospective buyers viewing the property with this guy living there and not being co-operative?

There are legal measures that can be taken to force a sale on an unwilling party, but I imagine they are messy and expensive.

I would probably invite him to get his own valuation done. If it is similar to yours then he should accept it, at least if he is sincere about wanting things to move on.


He has got his own valuation done, it's £350k.

I'm not taking any account of any agent fees as they are not payable so no need to try to complicate matters with them (other than to remind him he is benefiting from not paying them). And I am not reducing by 10%, that's a daft notion.

No I can't "force" a sale, but I can tell him 'oh well, we can't agree, best sell' and see what happens then.

Similar houses in the same village are on the market for £450k.

Mel

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Re: SDLT on 'buy out'

#23679

Postby redsturgeon » January 17th, 2017, 9:22 am

melonfool wrote:
He has got his own valuation done, it's £350k.

I'm not taking any account of any agent fees as they are not payable so no need to try to complicate matters with them (other than to remind him he is benefiting from not paying them). And I am not reducing by 10%, that's a daft notion.

No I can't "force" a sale, but I can tell him 'oh well, we can't agree, best sell' and see what happens then.

Similar houses in the same village are on the market for £450k.

Mel


So have you had a valuation done too? It seems like his valuation is a little low.

I would say in any case like this that you should get three independent valuations to be fair to all.

John

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Re: SDLT on 'buy out'

#23686

Postby melonfool » January 17th, 2017, 9:59 am

redsturgeon wrote:
melonfool wrote:
He has got his own valuation done, it's £350k.

I'm not taking any account of any agent fees as they are not payable so no need to try to complicate matters with them (other than to remind him he is benefiting from not paying them). And I am not reducing by 10%, that's a daft notion.

No I can't "force" a sale, but I can tell him 'oh well, we can't agree, best sell' and see what happens then.

Similar houses in the same village are on the market for £450k.

Mel


So have you had a valuation done too? It seems like his valuation is a little low.

I would say in any case like this that you should get three independent valuations to be fair to all.

John


No, I haven't. I really can't see the point to be honest. He doesn't have to take any notice of anything I say whether there is a 'valuation' or not (and, frankly, what do estate agents really know eh? One minute they are putting notes through your door saying they want houses like yours and have buyers lined up to buy TODAY and the next they're sucking their teeth saying 'well, there are a lot like this on the market right now and that other one sold for xx so I think you need to reduce the price...').

I have downloaded all the recently sold prices from Zoopla although funnily enough he is relying on some information he has got from somewhere about a house the same as our selling in 2015 for £340k - but he has not provided any written evidence of this and it doesn't show up on Zoopla at all.

Ours was valued at £350k in spring 2015 for the remortgage.

I have also compiled a list of locally available similar houses and what they are on the market for - the £450k ones are new build, so take off 10% newbuild premium and you're still on £400k. They might be in a slightly nicer position (not sure really, depends what you like) and they are laid out differently, but I am going with £380k for ours.

He tells me he has had two EAs round, one has provided a report saying to put it on the market for £365k, despite this he says they verbally told him £350k :? and the second EA (who, remarkably, also said £350k) has not provided anything in writing. I have asked for it twice.

I don't have to accept his offer, he doesn't have to make an offer I want to accept - no matter what evidence either side provides.

The one leverage point I have , of course, is that he really doesn't want to move. He doesn't want to upset his precious son in his GCSE year (even though he is currently rocking Ds in most subjects) - even though he could buy a cheaper house on the same development, with 4 instead of 5 bedrooms that would be perfectly sensible.

I don't want to take time off work to deal with this and I work away so can't pop home to see EAs. I'm going to need enough flexibility and holiday days just to move so I need to minimise that now.

Mel

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Re: SDLT on 'buy out'

#23698

Postby redsturgeon » January 17th, 2017, 10:31 am

Potentially a tricky situation I hope it all goes well for you, as smoothly as any of these things go. I guess you don't need telling that it is best not to physically move out until everything is settled otherwise it could drag on for a long time.

Just try to imagine how good life will be without the grotty teenager around...bliss!

Good luck

John

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Re: SDLT on 'buy out'

#23710

Postby melonfool » January 17th, 2017, 11:04 am

redsturgeon wrote:Potentially a tricky situation I hope it all goes well for you, as smoothly as any of these things go. I guess you don't need telling that it is best not to physically move out until everything is settled otherwise it could drag on for a long time.


Yes - quite. Timings are tricky - I can't/won't move out until he pays up, and when he does I have to move out That Day!

The fact he won't speak to me makes all of this complex, I want everything in writing too as he has form for 'not remembering' agreements and changing things significantly. And every time I do email him to say things like "can you send the second valuation" he replies with some new rant about how useless I am and how awful I was to him, including the immortal words "and refused to look after my son when I was away on business", which probably sounds totally reasonable in his mind but in my mind goes something like "er....well....yes, because, I work out of the house 14+ hours a day, he's not MY son and he refused to do anything I told him and you constantly undermined me and let him do whatever he wanted and the child does actually have a MOTHER, so it was NOT unreasonable of me to suggest he stay with her when you were away" etc - but I am retaining the moral high ground by not responding to any of that and just sticking to trying to negotiate the buy out value.

Though a large part of me wants to say "you'll be pleased to get rid of me then - pay up!". (though of course the loss of free child care is a blow to him and the mother I expect)


redsturgeon wrote:Just try to imagine how good life will be without the grotty teenager around...bliss!

Good luck

John


Yes, it's going to be so lovely. I will put stuff in places where it will stay. Things will remain unsoiled and unbroken. Food I buy will remain uneaten until I eat it. Things that are used will be put back where they are supposed to be.

Though the teen is on best Behaviour at the moment, since the massive row about the GCSE results he's been a bit subdued.... (funnily enough, his mocks were on one of the weeks his father was away on business)

Mel

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Re: SDLT on 'buy out'

#23730

Postby PinkDalek » January 17th, 2017, 12:37 pm

Melonfool wrote:SDLT on 'buy out'


Returning to the main thrust of your question, can I say I'm confused but haven't read the entirety!

I think you are saying he might be offering £175,000*** for your half of the property (despite the mortgage) and formally taking on responsibility for the full £65,000 mortgage (which he's already paying but it is joint).

Thus the consideration for SDLT purposes would be £175,000 + £32,500 = £207,500.

Using example 3 here https://www.gov.uk/guidance/sdlt-transf ... int-owners as the basis, might the SDLT be (as amended):

The new sole owner pays £1,650 SDLT (0% of £125,000 + 2% of £82,500)

Note the 2% rather than the 1% mentioned earlier in the Topic. Have I got this wrong?


*** I don't follow why he would do this, rather than look at the net equity in the property.


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