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Peter
Peter, Chartered Tax Advisor
Category: Finance
Satisfied Customers: 151
Experience:  Director at PDS Tax Limited
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My partner and I live together and own a second home which

Customer Question

My partner and I live together and own a second home which we rent out. No mortgage. I own 55% my partner 45%. We live together but are not married.
Assistant: Have you talked to a financial professional about this?
Customer: He now wishes to transfer his share of the equity to me. A solicitor had suggested he gifts me the property for nothing and I give him money privately. This avoids Stamp Duty. But surely there are tax implications in simply transferring £126.5k into his account. He is doing this to realise his investment as his pension
Assistant: Anything else you want the Accountant to know before I connect you?
Customer: No that’s it
Submitted: 3 months ago.
Category: Finance
Expert:  Peter replied 3 months ago.

Hi, my name is ***** ***** I am a Chartered Tax Advisor.

I will look into the capital gains point and let you know later today. I am concerned that there may be anti avoidance which may treat the gift as being a sale taking place at market value.

Regarding stamp duty land tax - have you already taken advice about this? Just on the basis of what you have said I am not sure that there is definitely not an SDLT issue. Do you own another residential property?

Kind regards, Peter

Customer: replied 3 months ago.
Hi peter, my prime concern is the stamp duty one.
My partner moved in with me 3 years ago and I paid off his mortgage in return for 55% of his house. I paid stamp duty of around 5k and he retained 45%. There is no mortgage but we rent out the house and pay tax on the income.
My partner now wants to sell or gift me the resining 45% to use as his pension. We have agreed £126.5k. My solicitor has advised he can simply transfer the ownership over to me with the land registry for no money and instead I pay my partner privately the £126.5k. This avoids stamp duty. He says this is perfectly legal but I am concerned:
A) it is circumnavigating stamp duty laws
B) I will struggle to calculate my capital gains tax liability when I come to sell itWe are both 20% tax payers and yes this is my second honeHope that helps
Linda
Expert:  Peter replied 3 months ago.

Hi Linda

I would ask your solicitor whether he or she has considered s108 FA 2003 which refers to linked transactions. For further reading see here https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm30100. I should think tis legislation will treat the gifting of the interest in the property and the return gifting of cash will treat them as one and the same transaction. If it does, as this would count as a second property, some SDLT would be payable by your partner.

For capital gains tax purposes there would also be a disposal at market value under s17(a) TCGA 1992 if the transaction was structured as a gift. Usually such transfers would be covered by the spousal CGT exemption however as you are unmarried this does not apply. For your reference a link to the HMRC guidance is here https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14540.

If you would like help calculating the gain please let me know:

  • The open market value of your share (is it £126.5k?)
  • The amount you paid for your share when you acquired it
  • Please give me an idea of your usual total annual taxable income

Kind regards, Peter

Expert:  Peter replied 3 months ago.

Hi Linda

I hope my answer was helpful. If you have any further queries please let me know. If you have no further questions please be so kind as to rate my answer.

I look forward to hearing from you.

Kind regards, Peter