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Deed of Trust Stamp Duty

28/10/2019
A deed of trust can create a stamp duty land tax liability. This does not affect buyers of property who draft a deed during the conveyancing process when first buying the property as they will be liable for stamp duty payable on their purchase as normal.

Where many only feel that stamp duty is payable at the outset when they purchase the property, if you are drafting the deed once you own the property and the transaction provides an individual with an interest in land, stamp duty land tax (SDLT) or land transaction tax (LTT) will be payable by reference to any chargeable consideration given for it. Chargeable consideration is defined in the Finance Act 2003, Schedule 4, Stamp duty land tax: chargeable consideration and confirmed by HMRC with examples here How much is chargeable: Non-cash consideration: Assumption or release of a debt.

In this article we explain what stamp duty is payable when you draft a deed of trust, how to file and pay the stamp duty and what you can do to reduce the stamp duty liability. You should always speak to HMRC about any stamp duty land tax enquiry you may have as you are liable for any penalty, tax and interest for getting it wrong.

Do you need a deed of trust?

Our solicitor specialises in drafting deeds of trusts and deed of assignment. Whether drafted for tax purposes or to protect your interest we offer both standard and bespoke deeds to suit your circumstances.

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How do you calculate what stamp duty is payable?

Consideration can be cash changing hands or the taking on of a debt (such as a mortgage or personal loan). To work out the total consideration you add the cash/money being paid for the assignment and the new owner’s share of the existing mortgage/loan debt. If the total consideration exceeds the stamp duty threshold, then stamp duty is payable at the prevailing rate. Use our FREE online stamp duty calculator to work out your stamp duty liability.

Example where stamp duty is payable

For Example: Ian solely owns a property valued at £300,000 with a £275,000 existing mortgage. Jane, the wife of Ian, is transferred onto the legal title and onto the mortgage. Ian agrees that Jane owns 99% of the beneficial interest and Ian owns 1% and Jane doesn't pay Ian any money for her share, however Ian and Jane agree that she takes on 99% of the existing debt (the mortgage on the property) and this is confirmed within a deed. Stamp duty land tax is payable on the consideration based on 99% of the existing debt of £275,000 which equates to £272,250 as she takes on 99% of the existing debt. Stamp duty land tax is paid on the £272,250 at the prevailing rate.
 

Example where stamp duty is not payable

For Example: Ian solely owns a property valued at £300,000 with a £275,000 existing mortgage. Ian assigns 99% of the beneficial interest to Jane but doesn't add Jane to the legal title and doesn't add Jane to the existing mortgage debt. Ian remains solely responsible for all of the existing debt and this is confirmed in the deed. Jane doesn't pay any money for the beneficial interest and doesn't take on any of the existing debt (the mortgage on the property) or any other debt; so there is no consideration for the transfer. Stamp duty land tax is payable on the consideration, however the consideration for the transaction is nil.
 
Stamp Duty Land Tax is a self-assessment tax that you make to HMRC so you need to make sure you ar paying the right amount based on your own circumstances. The best thing to do is call HMRC for help with Stamp Duty Land Tax queries and to confirm your own personal liability on 0300 200 3510 Opening times: 8.30am to 5pm, Monday to Friday (closed weekends).
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How do you declare your stamp duty?

Any stamp duty land tax should be declared and paid to HMRC within 30 days after completion of the transaction otherwise you may incur penalties. You can file your stamp duty land tax return with HMRC by clicking here https://www.gov.uk/guidance/stamp-duty-land-tax-online-and-paper-returns and pay any liability by clicking here https://www.tax.service.gov.uk/pay/stamp-duty-land-tax/choose-a-way-to-pay.

No second home stamp duty for transfers to spouse

Whilst normal stamp duty bands are applicable there is no second home stamp duty for transfers to civil partners or spouses where they were living together when they bought the property. Under SDLT - higher rates for additional dwellings: purchasers with a spouse or civil partner it states:

From the 22 November 2017 - transfers of interests between spouses and civil partners
From 22 November 2017, the higher rates’ rules disregard transactions solely involving the transfer of interests between spouses or civil partners while they are treated as living together on the date of purchase – see section 1122 of the Corporation Tax Act 2010 for more details [Para 9A].

If, before or after the transaction takes place someone other than the spouses or civil partners has an interest in the property, the transaction will still count as a higher rates transaction. For example, a transaction would not be disregarded where an interest owned by a wife and her otherwise unrelated business partner is transferred to her husband.


How can you reduce the consideration to nil?

Where you transfer the beneficial interest for no money the deed can be drafted to confirm that whilst the beneficial interest can be transferred, the actual existing debt/s on the property do not and are solely the responsibility of the assignor. This would mean that as long as there was no money changing hands, the existing debt remained the liability of the parties on the mortgage and not the party being assigned the beneficial interest or any other consideration, then there will be no stamp duty payable. You should always speak to HMRC to confirm your stamp duty liability based on your own personal circumstances.


Do you need a deed of trust?

Our solicitor specialises in drafting deeds of trusts and deed of assignment. Whether drafted for tax purposes or to protect your interest we offer both standard and bespoke deeds to suit your circumstances.

Fixed Fee – Fast Turnaround – Specialist Support from a Solicitor