Decleration of Trust to Ltd?

Trusts Discussion
1

Hi,

I have a client who wishes to transfer the benfical interest of a mortgaged buy 2 let, can anyone help the SDLT that maybe due?

HMRC state a transfer without chargable consieradtion = No SDLT.
HMRC consider a transfer of the mortgage debt (which is the case here) is a chargebale consideration so = SDLT is due the debt.
HMRC state that any purchase by a Ltd = SDLT at market value.

Is a transfer via DOT - a bare trust a ‘purchase’?
Would SDLT be payable on the mortgage value or the market value?

Thanks

Richard Bishop
Premier EP

2

By s.53, the MV of the property is the deemed minimum consideration so probably the actual deemed consideration for this transaction (the debt is unlikely to be greater than the property value).

Yes, this is treated as a purchase.

Andrew Goodman
Osborne Clarke LLP

3

As Andrew indicates there is an SDLT charge on transfers to the company whether by way of gift or otherwise assuming that the transferor and company are “connected” at the time of the transaction.

For this purpose “connected” is defined in CTA 2010 s.1122.

Malcolm Finney

4

Thanks Andrew,

Just a quickie - Can the DOT incude a clause that exculdes taking on a debts, therfore no ‘chargable consideration’?

IE - Right to income (rental income), responsibilty to pay any mortgage interest payments, a formal exclusion of any debts (mortgage debt).

Richard Bishop
Premier EP

5

I don’t quite understand the question.

Under s.53 the market value of the property is the minimum chargeable consideration. Debt becomes irrelevant unless it is larger than the value of the property e.g. a debt of £100k secured on a £80k property.

Andrew Goodman
Osborne Clarke LLP

6

Hi Andrew,

Thanks for the reply, you have answered my rather clumsy question now.
In my clients case s.53 does apply so the SDLT would be deemed at market value.

Does the £40,000 exemption still apply if s.53 is applicable - ie a transfer of a property worth £38,000 (market value) would still be exempt?

Richard Bishop
Premier EP

7

I believe so. I think it falls in Sch 4ZA para 4 (referring back to the exemption in 3).

Andrew Goodman