I would like to enquire about the feasibility, and tax implications, of transferring beneficial ownership regarding my particular circumstances. I own a flat in Liverpool, which I live in as a joint tenant together with my mum. We are both also on the mortgage deed. I would like to transfer beneficial ownership, so my mum holds 99%, and I hold 1%. Among the key questions I have at this stage is whether there would be any stamp duty land tax (SDLT) implications in this scenario. As my mum is already on the mortgage deed, and I presume jointly liable for the entirety of the remaining mortgage, I can’t see what the chargeable consideration would be in this case by me transferring any amount of beneficial ownership. Would there be any capital gains tax (CGT) implications in view of the fact that we are both already legal owners of the property? What are the implications of having this 99%/1% beneficial ownership structure when it comes to any future sale of the property whilst we are both alive and in the case of one of us passing?
Arthur Weller replies:
HMRC makes an assumption in its SDLT manual at SDLTM00330a (https://tinyurl.com/HMRC-SDLTM00330a, Example 3) that if ownership of the property is being transferred, mortgage responsibility is also being transferred. This assumption is highly questionable. Just to be on the safe side, it is worth stipulating in the document transferring beneficial ownership from you to your mother, that there is no change in mortgage responsibility. Then there will be no SDLT on this transfer. However, there will be CGT on this transfer, as CGT follows beneficial ownership (see HMRC’s Capital Gains manual at CG70230) (https://tinyurl.com/HMRC-CG00330a), and you are disposing of beneficial ownership of 49% of the property. The legal ownership is irrelevant here. When the property is sold in the future, your mother will receive 99% of the sale proceeds, and you 1%. When your mother dies, 99% of this property will be included in her estate for inheritance tax purposes.