What are the SDLT Consequences of a Declaration of Trust for Consideration?

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“A owns property. Value £280,000. Until November 2015, there were two charges secured on it. The first charge in favour of Halifax PLC and the second charge in favour of B and C for 50% of the net sale proceeds of the property after payment of the Halifax mortgage.

In November 2015, B and C’s parents paid off the amount outstanding on the Halifax mortgage in the sum of £59,354.48.  The ‘consideration’ for paying off the mortgage was an agreement with A that she should transfer the ownership of the property from her sole name into the joint names of her, B and C as tenants in common with a trust deed showing the first £280,000 of the value in the property to be shared as to 50% to A and 50% to B and C and then any surplus value to be divided as to 40% for A and 60% to B and C.

B and C live in America.  It is not known at this stage if B and C own properties in America or elsewhere.

On completion of the transfer from A to A, B and C the charge in favour of B and C will be discharged so that they become part owners rather than chargees.

What is the SDLT position please?”

Source: BLG Member 


It seems that A has transferred her interest in the property to herself, B and C to be held on bare trust as tenants in common in consideration of the payment of £59,334 to Halifax and the release of the charge over the property in favour of B and C.

B and C’s interests as tenants in common will be a chargeable interest and they will be purchasers for SDLT purposes.  The amount secured by the charge when it was released would, presumably, be half the then-market value less sales costs and less the amount owed to the Halifax.

Where the chargeable consideration for a land transaction consists in whole or part of the release of debt owed by the vendor, the amount of debt released is taken to be the whole or, as the case may be, part of the chargeable consideration for the transaction..

‘Debt’ means an obligation, whether certain or contingent, to pay a sum of money either immediately or at a future date.

The chargeable consideration will therefore be the amount secured by the charge at the date it was released plus the amount paid to clear the mortgage.

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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