Question. We are divorcing/ splitting up and want to transfer a property from our joint names into the sole ownership of one partner.
Answer.
A transaction of this kind will be exempt from SDLT (Stamp Duty Land Tax) if it is effected in pursuance of a court order or an agreement between the parties in connection with divorce, nullity of marriage or judicial separation, or the dissolution of a civil partnership (Schedule 3 Finance Act 2003). Otherwise, SDLT will be charged, based on the consideration given for the transfer including
any cash payment and any assumption of liability to pay the current mortgage. The liability assumed is taken to be a proportion of the outstanding mortgage corresponding to the proportion of the share of the property which is acquired.
Example 1
A house is valued at £350,000. The partners have equity of £250,000 and there is an outstanding mortgage of £100,000.
The person staying on the property title (transferee) pays a cash sum equivalent to 50% of the equity and acquires sole ownership of the property.
The consideration in this case will be the cash payment (£125,000) plus 50% of the outstanding mortgage (£50,000) = £175,000. This is above the stamp duty land tax threshold of £125,000 and the tax due on the consideration at 1% will be £1,750.
The person staying on the property title (transferee) pays a cash sum equivalent to 50% of the equity and acquires sole ownership of the property.
The consideration in this case will be the cash payment (£125,000) plus 50% of the outstanding mortgage (£50,000) = £175,000. This is above the stamp duty land tax threshold of £125,000 and the tax due on the consideration at 1% will be £1,750.
Example 2
A flat is valued at £250,000. The partners have equity of £150,000 and there is an outstanding mortgage of £100,000. The person staying on the property title (transferee) pays a cash sum equivalent to 50% of the equity and acquires sole ownership of the property. The consideration in this case will be the cash payment (£75,000) plus 50% of the outstanding mortgage (£50,000) = £125,000. This is at the stamp duty land tax threshold of £125,000 and the tax due on the consideration shall be NIL.
