Property question ... on the off chance someone has done this

[monty77]

Clearly will be seeking professional advice but wanted to shoot this out before going too far down the road.

In 2012 we bought a flat for a relative jointly with family for £130k. It's a freehold flat so getting a mortgage was fun so the other party took the mortgage on their property (interest only) and it's sat there ever since.

We are now in the position to buy them out and take sole ownership but it's got me thinking about tax liability, specifically stamp duty. The deal would be:

- We repay the £130k mortgage that currently is on their property, to recap the property in question (the flat) is not mortgaged
- We pay them £55k for their share for the increase in value (current flat value is approx £240k)

..so the only 'cash' changing hands is £55k, so is that the amount considered for stamp duty? Or does the mortgage amount come into it too? If the former we're well under the £125k ceiling of course.

Thanks!
Adam

[sevvy]

You haven't said if you own another property but if you do then chargeable consideration for higher rate stamp duty is £40k so I believe you would be liable for the total amount you take over.
HMRC's stamp duty is fairly detailed:
https://www.gov.uk/guidance/stamp-du...ntial-property

[monty77]

You haven't said if you own another property but if you do then chargeable consideration for higher rate stamp duty is £40k so I believe you would be liable for the total amount you take over.
HMRC's stamp duty is fairly detailed:
https://www.gov.uk/guidance/stamp-du...ntial-property

Sorry, good point.

I do. In total our home, a rental, and currently a share in this property which I'm looking to make wholly mine.

So the consideration would be:

50% of initial purchase = £65000
'buy out fee' = £50000
= £115000 @ £3540 stamp duty

..any of the fees that I'd pay to do this at least tax allowable deductions? Stinks, doing this to help out family and not to line my own pockets.

[David_D]

..any of the fees that I'd pay to do this at least tax allowable deductions? Stinks, doing this to help out family and not to line my own pockets.

You may ultimately get relief as part of the cost for CGT purposes but nothing against income as far as I can see.

[catch21]

Clearly will be seeking professional advice but wanted to shoot this out before going too far down the road.

In 2012 we bought a flat for a relative jointly with family for £130k. It's a freehold flat so getting a mortgage was fun so the other party took the mortgage on their property (interest only) and it's sat there ever since.

We are now in the position to buy them out and take sole ownership but it's got me thinking about tax liability, specifically stamp duty. The deal would be:

- We repay the £130k mortgage that currently is on their property, to recap the property in question (the flat) is not mortgaged
- We pay them £55k for their share for the increase in value (current flat value is approx £240k)

..so the only 'cash' changing hands is £55k, so is that the amount considered for stamp duty? Or does the mortgage amount come into it too? If the former we're well under the £125k ceiling of course.

Thanks!
Adam

Fairly sure stamp duty is payable on the agreed valuation of the property rather than on the amount of money that changes hands? Could be wrong.

[monty77]

Fairly sure stamp duty is payable on the agreed valuation of the property rather than on the amount of money that changes hands? Could be wrong.

Sounds more like it unfortunately, otherwise there'd be a sea of people selling houses for £1 :-)

..really hoping it's proportional at least though, after all SD was paid on purchase by 50% of the same people involved in this new transaction (e.g. me!)

[sarky]

Maybe reading this incorrectly, but if you bought the property in the first place, you have no SDLT responsibility, as you will not be purchasing (again), but simply raising funds to repay the other party.

A quick call to a property lawyer will answer your question. The audience here is more brogues and sports cars for the hairdressing industry.

[monty77]

Maybe reading this incorrectly, but if you bought the property in the first place, you have no SDLT responsibility, as you will not be purchasing (again), but simply raising funds to repay the other party.

A quick call to a property lawyer will answer your question. The audience here is more brogues and sports cars for the hairdressing industry.

..names are changing on the deeds so I'd have thought they'd want their pound of flesh but happy days if not the case. Waiting to hear back from my solicitor but wondered if people had done similar things here - point well noted!

[sarky]

..names are changing on the deeds so I'd have thought they'd want their pound of flesh but happy days if not the case. Waiting to hear back from my solicitor but wondered if people had done similar things here - point well noted!

Names are not changing, unless you add another. Without a purchase taking place from one party to another, there is no requirement. Think divorce scenario etc. Simply one joint owner takes responsibility for the property.