Emyr Pierce

I own a property valued at £410,000 in my sole name. I have recently married and am in the process of remortgaging my property to get a better deal. To secure the best deal I need my wife’s salary to be taken into account by the Lender and I intend to transfer the property into our joint names as this will be a requirement of any mortgage in our joint names. My existing mortgage is £295,000 and I am looking to borrow precisely the same amount from the new Lender. I am astounded to find out that my Solicitors have advised that Stamp Duty will be payable on the transfer into our joint names, why is this?

Stamp Duty Land Tax is payable on any consideration payable for an interest in land.
While no money is actually changing hands in this example, there is a substantial consideration being made by your new wife. At the present time the property is in your sole name with you being solely liable for the existing mortgage. What is being proposed is that the new mortgage, albeit for the same amount, will be the responsibility of both of you and in respect of which the property is being transferred into your joint names.

In other words, your wife is receiving one half of your property in return for her becoming liable for one half of the mortgage debt (despite the fact that you will both be jointly and severally liable for the debt in any event). In this instance there is effectively a consideration made by your wife of one half of the mortgage debt in return for her receiving a one half interest in your property.

Sadly, in your case, as your mortgage is substantial, one half of the mortgage debt amounts to £147,500, which is in excess of the Stamp Duty threshold of £125,000 and, accordingly, a Stamp Duty charge of 1% of the consideration (£1,475) will be payable

I have finally found a house I wish to buy, the owner of which is keen on buying my own property. If we do a “swap” will I make a substantial saving in Stamp Duty Land Tax?

Sadly the answer is no. It has been many years since the Inland Revenue introduced the rule in which Stamp Duty Land Tax (SDLT) is no longer payable on the “Equality of Exchange” being the term used for the difference between the two sale prices.

Previously, the former Stamp Duty was only payable on the Equality of Exchange, which made exchanges of properties between interested parties a cost-effective and attractive proposition.

When you consider the extent of revenue lost by the Inland Revenue to such transactions this is hardly surprising. A sale of a property at £400,000 would attract tax of £12,000 which, when swapped for a property worth £300,000, the duty of which is £9,000, would have previously resulted in no Stamp Duty payable and a saving of £21,000 as the “equality of exchange” of £100,000 would, of course, have been exempt from Stamp Duty Land Tax.

The current rule, therefore, is that Stamp Duty Land Tax is assessed separately on each property based on the two figures quoted.

I am interested in buying a property for £255,000 but am concerned about the stamp duty issue. Can I do anything to minimise stamp duty payable?

The price of £255,000.00 is just over the first stamp duty threshold where Stamp Duty Land Tax (SDLT) changes from 1% to 3%. In other words for the extra £5,000 it is costing you an extra 2% on the overall price.

One way around this is to agree a genuine apportionment of the purchase price as to, say £250,000 for the house and £5,000 for fixtures and fittings which are included in the sale. Please note, however, that this apportionment must be entirely genuine and realistic otherwise it amounts to a fraud of the Inland Revenue.

If you can justify the cost of fixtures and fittings to the tune of £5,000 - and there is no benefit to a seller in participating in any potential fraud – then you will pay £2,500 in Stamp Duty, rather than £7,650. That’s a saving of £5,150.

I own a large plot of land in West Wales which I want to share with my son. Do I need to re-register this or will it be seen by the taxman as a gift?

If you wish to transfer the plot into the joint names of yourself and your son, this is effectively a lifetime gift of one half of the value of the plot. Provided you live for seven years from the date of the gift, then the value of this gift will not be taken into account in the overall value of your Estate for Inheritance Tax purposes on your death.

However, your son will need to be aware of the possible charge to Capital Gains Tax in the event of the value of his one half share in the plot increasing substantially in future years.

In view of the fact that it is a lifetime gift, a transfer into your joint names will not attract Stamp Duty Land Tax even if the value of the one half of the plot exceeds £175,000. The gift by way of Transfer will then be registered by HM Land Registry in your joint names.

My wife and I have divorced and finally reached a financial settlement which includes me paying her off a share of our home. How do I remove her name from the house deeds?

If as a result of the financial settlement you have remortgaged the property to help raise the money to pay your ex-wife her share of the home, then the position is relatively simple, as during the process of remortgaging, the property will be transferred from your joint names into your sole name. The former joint mortgage will be repaid out of your new mortgage funds and the property ending up in your sole name.

It is essential that if you are paying, in addition to repayment of your joint mortgage, an additional capital sum to your ex-wife, that the consideration shown in the Transfer into your sole name is the total of the capital amount payable to your ex wife plus her one half share of the existing mortgage debt, which you are, effectively, absorbing.

If the combined total of this exceeds £175,000 then Stamp Duty Land Tax will be payable – unless the settlement is made the subject of a formal Court Order. However, if there were no additional capital payment to be made and you were simply absorbing the existing joint mortgage, then this could be done by way of a Transfer of Equity into your sole name, provided of course the existing Lender was happy to release your ex-wife from the joint mortgage and to transfer the mortgage into your sole name.

If the existing Lender is not prepared to do this, then you may be faced with having to remortgage with another Lender, taking out a new loan in your sole name which would complete simultaneously with the transfer of the property into your sole name.

I am hoping to part exchange my house for a new one. I have heard that this is a good way of saving stamp duty. Is this true?

Unfortunately it is not true. Some years ago Stamp Duty, as it was then, was only payable on the “Equality of Exchange”. This was the difference between the sale and the purchase prices and proved popular in the last recession when property developers were finding it difficult to sell new properties and the Stamp Duty savings were a popular attraction of part exchange schemes.

The new regulations governing Stamp Duty Land Tax (SDLT), as it is now, has removed this major benefit in the case of part exchange transactions. Stamp Duty Land Tax is payable on the value of the asset being acquired – regardless of whether it is being part exchanged for an existing asset.

Accordingly, SDLT will be payable on properties where the price exceeds £175,000.00 and not on the “Equality of Exchange” between the two part exchange values.

* Emyr Pierce is Managing Partner of Emyr Pierce Solicitors in Rhiwbina, Cardiff, Western Mail Conveyancer of the Year, specialising in Domestic and Commercial Property. Contact www.emyrpierce.co.uk or email law@emyrpierce.co.uk

I am buying a flat and have agreed to pay £250,000. I have now been advised that the seller also owns a garage on the development and it is a condition that she must sell the garage at the same time as the flat either to the new flat owner or to someone else who is already an owner on the development. The cost of the garage is £15,000. I do not want the garage and am tempted to withdraw. What should I do?

You should not pay £15,000 for a garage you do not want. More importantly, the additional £15,000 for the garage will mean that the total cost of your purchase will put you in a higher rate band for Stamp Duty Land Tax moving you from the 1% band to 3%. It makes no difference that the garage transaction may be subject to a separate Lease and arguably a separate transaction. The reality is that it is a condition of the Garage Lease that it can only be transferred to either a new flat owner or an existing owner of another flat on the development. Should you buy the garage at the same time as the flat then it is a “linked transaction” for Stamp Duty Land Tax purposes and Stamp Duty is payable on the total amount paid, £265,000 – at 3%. If you didn’t want the garage in the first place then the additional £5,450 Stamp Duty should make it an easy decision for you to withdraw.

* Emyr Pierce is Managing Partner of Emyr Pierce Solicitors in Rhiwbina, Cardiff, Western Mail Conveyancer of the Year, specialising in Domestic and Commercial Property. Contact www.emyrpierce.co.uk or email law@emyrpierce.co.uk