Stamp Duty - Gifted Property

[SSG1000]

Hi all, seeking some support on a topic with respect to stamp duty.

I owned a property which was worth £595k and had a £100k mortgage. I gifted this property to my brother who took all the equity and arranged a new mortgage for £100k (this became his main residence).

I sought independent advice from an accountant, who suggested that this transfer would not be liable to stamp duty, rather only the chargeable consideration would be considered for stamp duty - fine.

We arranged our solicitors, one on my side and one on his. His conveyancer didn’t really know what was happening, but he relayed the information the accountant gave. His solicitor then went away and sought the necessary confirmations and relayed the same messaging via email that the stamp duty was only considered on the chargeable conservation.

However, post completion (approx 1 week after and paying the fees) he has now received an email from the solicitor saying that the stamp duty is now based upon the full property value (and confirmed via HMRC).

Where do we stand on this front, as we did this transaction on the basis that the stamp was of a lower value.

Thanks !

[reggie747]

Get another more complete and proper solicitor to sue the arse off the other two for not doing due diligence on the business you initially employed them to do.
They may have practise insurance that could cover the fee HMRC want from you.
Worth a try...

[SSG1000]

Head is hot, but it looks like they’ve both messed up the TR1 and suggested the full value of the property in the consideration section (not the chargeable consideration of the o/s mortgage, nor noting that the remaining amount was gifted equity).

As a result, HMRC have just gone and calculated the stamp on the full value.

If that fails, I hope they have a half decent professional indemnity insurance policy…..

[Panamax]

SSG1000 said:

We arranged our solicitors, one on my side and one on his.

Why would it take two solicitors to make a gift? Something's missing from the information posted here.

Sure, there was a mortgage loan involved and that element can attract Stamp Duty if over the threshold, but the question is how the whole transaction was actually structured/documented.

[SSG1000]

Two solicitors required as one cannot act on behalf of both parties (esp where we lived together) due to conflict of interest.

I subsequently have exited the property, upon completion.

[cb31]

Forgive my ignorance but if you own a property outright you can then gift it to someone free of stamp duty? What if it was an extra property that had increased in value, do you then need to pay CGT on the increase?

[Olivera]

Edit, looks like CGT is due if it's a gift.

Edited by Olivera on Tuesday 7th October 16:51

Edited by Olivera on Tuesday 7th October 16:58

[98elise]

cb31 said:

Forgive my ignorance but if you own a property outright you can then gift it to someone free of stamp duty? What if it was an extra property that had increased in value, do you then need to pay CGT on the increase?

Stamp duty is based on the sale price not the property value. CGT is due on the gain at market value if you gift it or sell it at a discount.

That's my understanding though!

[98elise]

said:

Owing the full stamp duty sounds entirely logical, otherwise every house purchase would be an agreement to gift the house when a gift equal to its value goes the other way.

That wouldn't be a gift. Same reason your employer can't just gift you some money every month while you work for "free".

In addition you would need your solicitors to risk their careers to commit fraud on your behalf.

It's here on the government website

https://www.gov.uk/guidance/sdlt-transferring-owne...

Edited by 98elise on Tuesday 7th October 17:01

Edited by 98elise on Tuesday 7th October 18:18

[SSG1000]

I’m no expert but the advice from my accountant is as follows:

Mortgage Free property, that’s gifted. No consideration transferred between parties, then no SDLT is payable. Instead you pay CGT. (Tax neutral between partners). But then you have IHT to consider too.

In my instance, this is my main residence. Which will now become my brothers main residence. His SDLT is charged based upon the chargeable consideration - with that being the mortgage amount (not the value of the property). Noting this is a gift with no cash coming my way. He owns no other property so it’s clean.

Tax rules are sneaky but this is a main residence to main residence scenario, and to my brother, so slightly easier to follow from a SDLT, CGT & IHT perspective.

[Panamax]

SSG1000 said:

Two solicitors required as one cannot act on behalf of both parties (esp where we lived together) due to conflict of interest.

Exactly. As I suggested, there was something missing from the original story.