Question: Transfer of property between siblings
My son and daughter jointly own a flat in Liverpool. My daughter no longer lives in the flat as her place of employment has changed. My son and his wife continue to live in the flat but are unable to buy my daughter's share. My daughter now wishes to buy a property near her place of work in Leeds. She has considerable equity in the flat but does not need to release it. She has been advised that she needs to remove herself from the deeds and mortgage on the flat to avoid second home stamp duty land tax (SDLT) and meet affordability criteria for a new mortgage. No money needs to change hands. How can she transfer her share to her brother? What are the tax implications? How can she protect her long-term interest in her equity in the flat?
Arthur Weller replies:
Answer: If your daughter removes her name from the legal ownership of the flat, and the mortgage, unless there is documentation to show she is retaining beneficial ownership, she will be deemed to have made a complete transfer to your son. As far as capital gains tax is concerned, it may be that there is none or very little to pay, since it appears that she has lived in the flat until recently. However, if he now takes over responsibility for the mortgage that until now she was responsible for, there could be some SDLT for him to pay, dependent on the amount of the mortgage. See HMRCs Stamp Duty Land Tax manual (www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00330a). Note regarding first time buyer's relief, HMRC’s guidance note (assets.publishing.servicfor example,gov.uk/government/uploads/system/uploads/attachment_data/file/759714/Stamp_Duty_Land_Tax_relief_for_first_time_buyers_-_guidance_note.pdf), at question and answer A22.