Most people only think of stamp duty as being something to worry about when buying a property from a seller.
This is not true.
HMRC’s definition of stamp duty is that it is a tax ‘payable on the purchase or transfer of property or land in the UK where the amount paid is above a certain threshold’.
From this definition, we can ascertain that no money actually has to change hands for stamp duty to apply.
Property transfers can occur in many different situations, such as getting married or divorced or inheriting a home and if any of these situations apply to you, it is important to know where you stand and how to avoid stamp duty on such transfers.
Transferring property following a divorce/separation
When it comes to divorces and the dissolving of civil partnerships, stamp duty land tax does not apply where if an interest in property or land is transferred to one or other of the couple as part of a court order or agreement.
There is no need to notify HMRC if a transfer takes place under these circumstances, even if the value exceeds the stamp duty threshold.
Transferring property following a marriage/civil partnership
Following a marriage or civil partnership, stamp duty may be payable if the consideration given in exchange for the transfer of the share exceeds the threshold for that type of property.
The term ‘consideration’ can mean either the value of an outstanding mortgage that the party acquiring part of the property takes over or cash payments.
Stamp duty will apply if the consideration is above the SDLT threshold. This can be the case where the consideration is split between acquiring part of the mortgage responsibility and paying cash.
In such instances, HMRC must be notified of the transaction.
Inheriting property from a will or as a gift
If you are to inherit a property through the will of a husband, wife, civil partner or family member, no stamp duty is payable and there is no need to notify HMRC.
This is the case even if the beneficiary takes on the outstanding mortgage, provided no other consideration is involved.
The same is true if you receive a property as a gift. There must be no outstanding mortgage for you to avoid stamp duty. If there is a mortgage, stamp duty may be payable if the value exceeds the stamp duty threshold.
Transferring to/from a company
Stamp duty on property transferred either to or from a company is slightly more complicated.
In certain situations, the amount of stamp duty payable is based on the market value of the property rather than the consideration when it is transferred to a company.
There are two situations where this may be the case. The first is when the person who transfers the property is in some way connected with the company.
The other situation is when the company pays for either part or all of the company by issuing or transferring shares.
If any of the above situations apply to you and you are unsure about the best way forward, you should speak to a stamp duty mitigation company about whether you are liable for the tax and if so, how you can go about reducing or avoiding it altogether.
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