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bigduckontax, Accountant
Category: Tax
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I have a 2 bed flat in central london with both title and mortgage

Customer Question

I have a 2 bed flat in central london with both title and mortgage in my sole name. My fiance and I are buying a house together and I want to keep the flat on as a rental for a few years. We secured a buy to let mortgage on the flat in both our names as the mortgage broker said it would go through more quickly and were told we'd just need to do a transfer of equity to add his name onto the title. I knew this would incur solicitors fees and he'd get an interest in the property which wasn't intended but is fine, but now I'm being told SDLT is also due as the mortgage is considered "consideration"! The mortgage is £265,315, so 50% takes us over the SDLT threshold. If we register as Tenants in Common on a 25%:75% ratio, is that applied for SDLT purposes? Would me paying off £15,000 of the mortgage so it comes in under the threshold be seen as evasion (it's interest only with my cash ISA as a repayment vehicle so arguably if I move some of my repayment vehicle monies across??)? This started out as an admin exercise and has become so complicated! Is the only answer to get him taken off the mortgage or added as a guarantor instead?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.
SDLT is considered by some an unfair tax because if you go a quid over the next step in the purchase price you can get hammered for an extra 1 or sometimes 2%, ouch! Technically the mortgage has nothing to do with SDLT, that is levied on the transfer price of the property at current market value. Here is HMRC advice on SDLT:
'Stamp Duty Land Tax (SDLT) may become payable when all or part of an interest in land or property is transferred from one person to another if anything of monetary value is given in exchange.
Anything of monetary value that's given in exchange for the property is referred to as the 'consideration'. This can be cash or another type of payment. It can also include the value of any outstanding mortgage that the buyer takes over. SDLT may be charged on the consideration.'
Whichever way you play it you can't wriggle out of it. Trying to split the property as Tenants in Common is a non starter; the consideration is the key. SDLT is imposed on the property not the individual. If you present the Land Registry with an un-stamped title it will be rejected and no one would buy from you without proper documentation. Historically solicitors were given a monopoly in conveyancing in exchange for collecting SDLT.
I am sorry to say you should have taken professional advice before you took the mortgage route. You have been well and truly caught by Benjamin Franklin's dictum that in life there are but two certainties, death and taxes and he was writing at the time when Stamp Duty was the main method of tax collection which was actually what the Boston Tea Party was all about!
I am so sorry to have to rain on your parade. SDLT is payable and that is the end of it.