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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4195
Experience:  FCCA FCMA CGMA ACIS
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Sdlt - my wife and I are proposing to transfer our house to

Customer Question

sdlt - my wife and I are proposing to transfer our house to our son and his wife. However we will be staying in the property for minimum of 12 months+ whilst we move/build/buy another property. We have a s/c annexe. If the house with vp has an omv of £750,000 I am proposing to move ownership from joint tenants to tenants in common and then my wife and I each transfer a 25% share to son and his wife at £150,000 [750,000 x 1/4 less 20% share allowance.] will we be able to pay sdlt on each £150,000 share ie 25,000 @2% and then if and when we transfer the other quarter shares repeat the sdlt. There is no guarantee we will ever vacate the annexe except on death as we are 65+ although we are intending to do so when funds permit
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

The UK has no gifts tax regime so these are outside the scope of UK taxation. Just thank your lucky stars you don't live in France where gifts tax kicks in at 5K Euros!

There is one matter for consideration. Gits create a Potentially Exempt Transfer (PET) in your Inheritance Tax (IHT) arrairs. PETs run off at a taper over seven years. The run off period does not start until you vacate. If you die within the time period the PET is added back to your estate and is the first to be exposed to IHT. If your estate is insufficient to meet the IHT on the PET the liability cascades down to the beneficiary for immediate payment.

IHT does not kick in until assets on death reach 325K. Between 2017 and 2020 the IHT limit will rise progressively to 500K for a family home left to children making a possible million between you and your wife. You will have to engage a Chartered Surveyor to split the values of the main residence and the granny annex. From this the value of the PET may be derived. The classic defence against IHT on a PET is a reducing term life insurance policy though the premiums might be prohibitive.

Your son and his wife will be liable for SDLT on the deemed consideration ie the current market value as at the date if initial transfer. If they already own a dwelling then they will be liable to the 3% surcharge which has been created to deter multiple ownership of houses. This surcharge can be refunded if the second dwelling is disposed of within three years.

I do hope that you have found my reply of assistance.

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Thank you. My son and wife will be moving into the house now and their own house will be sold in due course and certainly within 1-2 years. We will be sharing the property as the main residence for all of us for the time being. My concern is will each of the shares be added together for sdlt or can each stand on its own at £150,000. this will be the consideration for each quarter share whenever it is transferred [I am quite happy to negotiate values with the DV] just not sure whether they will accept each quarter share as a figure or whether they have to be added together if and when we transfer the second set of quarter shares which could be within 12 months.
I understand the risks re cgt and iht but we will deal with these as a separate issues, its just the sdlt that is my immediate concern
Customer: replied 1 year ago.
please call Thursday after 8.00 am as I am about to leave the office
Expert:  bigduckontax replied 1 year ago.

Got it will try to remember [joke]!

Expert:  bigduckontax replied 1 year ago.

You have not accepted my offer of a telephone call, please do so then we can proceed.

Expert:  bigduckontax replied 1 year ago.

Thank you for your support.

Expert:  bigduckontax replied 1 year ago.

The phone call seems to have gone completely haywire. Please request it again.

Expert:  bigduckontax replied 1 year ago.

I suspect it has expired.

Customer: replied 12 months ago.
Good MorningCustomerThank you for your interest; we do not propose to live in France and I have not yet expired But I am now in the office in england and if you can call me on 01428 708030 I will be glad to talk over our little problem
Expert:  bigduckontax replied 12 months ago.

Can you please offer your phone call request again. The original offer has expired.

Customer: replied 12 months ago.
Keith
Not sure what else I have to do to get a phone call - you can call me on 01428 708030 now or I can call you if that is easier
Richard
Expert:  bigduckontax replied 12 months ago.

There is a method for asking for a phone call. You did it before, but the offer expired. Please request it again.

Customer: replied 12 months ago.
I have tried every way I can see to request a phone call, that's all I can say. Can you discuss on line - its just about sdlt that I am concerned. I appreciate there may be cght and iht implications but I am comfortable with these. What my concern is how hmrc would view transfer of a quarter share of the freehold from self to son and a similar share from wife to daughter in law for consideration which I believe I could support valuation-wise. It is completely genuine as we will all be in occupation of the property for a while as our sole residence. Would they insist they are linked and add up the total and apply duty to that or do they accept that a quarter share owned by a tenant in common is just that, a quarter share and it would stand alone for sdlt.
Expert:  bigduckontax replied 12 months ago.

It is for the Stamp Office in Birmingham to decide. In my opinion they will take the appropriate share of the market value and apply SDLT, including any surcharge, to the purchaser accordingly.