What are the SDLT consequences of a transfer in connection with divorce?

“SDLT question re divorcing couple.

Marital home jointly owned and has a mortgage. Wife wishes to reside.

Second Property, owned solely by wife, (an inheritance). No mortgage and property casually let to friends and family as a holiday let. Property to be potentially given to husband.

I’m not really not sure on the position re  SDLT if the property is passed from wife to husband in this instance (assuming it were transferred prior to the divorce being finalised).

It would be my assumption that if the property were given post-divorce, that the husband would certainly pay stamp duty and at 3% rate if he were still associated to the former marital home (‘FMH’), (i.e. still on the mortgage and thus land registry). I understand that he could reclaim the higher SDLT paid if he were removed from the FMH title and mortgage within three years.”

Source: BLG Member

 


A transaction between one party to a marriage and the other is exempt from the charge to SDLT if it is carried out:

1) in pursuance of an order of a court made on granting in respect of the parties a decree of divorce, nullity or judicial separation;

2) in pursuance of an order of a court made in connection with the dissolution or annulment of the marriage, or the parties’ judicial separation, at any time after the granting of such a decree;

3) in pursuance of:

a) an order of a court made at any time under section 22A, 23A or 24A of the Matrimonial Causes Act 1973; or

b) an incidental order of a court made under section 8(2) of the Family Law (Scotland) Act 1985 by virtue of section 14(1) of that Act; or

4) at any time in pursuance of an agreement of the parties made in contemplation of or otherwise in connection with the dissolution or annulment of the marriage, their judicial separation or the making of a separation order in respect of them.

In any other case, the normal SDLT rules will apply. Some pointers:

  • Will this be an exchange?  If so, the consideration will be the market value of the interest acquired in each case.
  • Wife’s acquisition of husband’s half share in FMH is likely to be a higher rates transaction unless she disposes of her interest in the second property to husband first.
  • If husband’s acquisition of interest in second property takes place before his disposal of interest in FMH that is likely to be a higher rates transaction with SDLT paid reclaimable if second property ‘becomes a replacement’ for FMH within three years

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.

For further  guidance on SDLT please see Ann’s Stamp Duty Land Tax Questions & Answers. This free resource covers a wide range of SDLT queries and they can be filtered by topic to find specific queries of interest.

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