My sister wants to sell her share of our holiday home in Torquay, which is owned as tenants-in-common in equal shares by my sister, myself, and our two brothers. She doesn't want us to buy her out for an agreed amount; she wants the whole house put on the market. Otherwise, she says she will take us to court for an Order for Sale. My question is about the tax implications of selling the whole house versus just a quarter share. If the house does go on the market and my brothers and I buy it, will we pay stamp duty land tax (SDLT) on the whole value of the house, even though we already own three-quarters of it? And will we, in addition, have to pay capital gains tax (CGT) on our own original shares which we will have (in a sense) bought from ourselves? Or (as I hope) will HMRC just be interested in the one-quarter share that is transferred from my sister to the other three owners, on which we will pay SDLT and she will pay CGT?
Arthur Weller replies:
I think you need to get legal advice for this. However, although it is talking about something else, it states in HMRC’s Business Income manual at BIM47820: ‘This is because individuals cannot rent property to themselves.’ I would suggest logic dictates that a person also cannot sell to themselves because a disposal means a change in ownership (see HMRC’s Capital Gains manual at CG12700), and stamp duty land tax (SDLT) is charged on a land transaction, which is defined as ‘the acquisition of a chargeable interest’ (see HMRC’s Stamp Duty Land Tax manual at SDLTM00260). So, it seems to me that you only need to concern yourself with SDLT and CGT on her quarter share.