Chapter: 2 - Inheritance Tax Mitigation: The Basics

Stamp Duty Land Tax

2.14.3

A gift, pure and simple, of land and buildings does not attract SDLT (FA 2003 Sch 3 para 1), just as under Stamp Duty a gift of shares can be certified as attracting no Duty (The Stamp Duty (Exempt Instruments) Regulations 1987 SI 1987/516).  But if the land is subject to a mortgage or is transferred in consideration of the removal of a debt, the amount of the mortgage or debt constitutes chargeable consideration for SDLT purposes (FA 2003 Sch 4 para 8).  So, with residential land, if the mortgage debt exceeds £125,000 (£175,000 for transfers after 2 September 2008 and before 1 January 2010), the nil-rate threshold, there will be SDLT to pay.  The rate is 1% if the consideration does not exceed £250,000, 3% up to and including £500,000, 4% up to £1 million and 5% where more than £1 million. (For ‘first-time buyers’ as defined the nil-rate threshold is £250,000 for acquisitions after 24 March 2010 and before 25 March 2012.) And in any case there will be compliance implications for making the transfer for a deemed consideration of £40,000 or more (£1,000 or more before 13 March 2008).

There is a further point.  If land is transferred to a company with which the transferor is connected (within the meaning of CTA 2010 s1122) or in consideration of shares in a company controlled by the transferor, the consideration is deemed to be not less than the market value of the land – ie it could be more if such actual consideration is paid, but cannot be less (FA 2003 s53).  This may be an unlikely thing to happen, though the point should be borne in mind, eg with the grant of a lease to a family company as part of IHT planning arrangements: see 6.6.1.