SDLT - is it payable where a beneficiary takes a property with finance?

Trusts Discussion
1

Dear all, a nice easy question I hope! An estate of a deceased has a property with a mortgage, and an ex-wife will be benefitting from the estate due to the fact the deceased never paid a divorce settlement. It looks like the whole estate after debts are paid etc., will go to the ex-wife. Under divorce law, it looks like no SDLT is payable where there is also finance needed to take the property. However, under inheritance law, it is my understanding that SDLT would be payable, where finance is needed to keep the asset.

As the payment is in effect the repayment of an estate debt (the divorce settlement that was never paid), does this also escape SDLT? The ex-wife is likely to arrange a loan to repay the current mortgage (which is a buy to let mortgage and the lender will not agree to let her move there with that loan as her main residence). Just to complicate things a little, the deceased was not UK domiciled (but was resident) and the beneficiary is non domiciled as well, and the divorce settlement was in Europe, but a UK court hearing did rule it could be enforced in the UK. The Will was a discretionary trust. Thank you!

2

It may help to look at Finance Act 2003 Sch.3 para3A, specifically sub-para (2) to the general position of SDLT on inheritance vis-a-vis secured debts.

I expect it will be key to clarify whether the ex-wife is inheriting assets or whether she is receiving payment in settlement of a claim, as this will effect the SDLT analysis.

3

Thank you - I don’t think this is affected by domicile issues at all, and the transfer to the ex-wife is to pay her divorce debt, and so should be SDLT free, but if anyone thinks otherwise, please let me know!