Is the release of a debt chargeable consideration for SDLT purposes?


“I have two almost identical transactions. Both files involve freehold properties owned by a limited company, where the money for the purchases was provided by the directors personally. This is shown in the company’s accounts as directors’ loans (i.e. as loans from the directors to the company).

On accountants’ advice, the companies are now transferring the properties to the directors in their own names. No money is changing hands but the directors’ loans will of course be released in return.

It’s occurred to me that there might in fact be an SDLT consequence of these transactions because of paragraph 8 (1 & 1A) of Schedule 4 to the Finance Act 2003.

FA03 says the assumption of liability for existing debt will be chargeable consideration for SDLT purposes, and this will include where the rights or liabilities of any party to the transaction are changed in relation to the debt. It’s the bit in italics which concerns me.

If this is correct, then SDLT would (assuming over the threshold) be payable on the amount of the directors’ loans being released.

Is this correct?”

Source: BLG Member


You are correct. Paragraph 8(1)(a) of Schedule 4 provides that the release of a debt due to the purchaser as part of a land transaction is chargeable consideration. The debt is not secured on the property so paragraph 8(1A) is not relevant.

At the time of publication this response was correct however as tax legislation and practice change from time-to-time you should take specific advice before taking any action.

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