What are the SDLT consequences of purchasing a property from a wholly-owned company?

,

“Mr and Mrs K’s current only or main residence is registered in the sole name of Mr K .  The couple are selling this and buying a new property which will be their new only or main residence. Mrs K does not own any other property in her name but owns other properties in various company names.

The new property is being sold by a company, all the shares in which are owned by Mr K and his wife.  The purchase price is £3,350,000 which is the market value. They intend porting the existing mortgage of £2,500,000 from the old to the new property.

Mr and Mrs K want to know if they will be liable for SDLT on the purchase and, if so, how much bearing in mind that they already ‘own’ the property they are purchasing and have already paid SDLT on the purchase by the company.”

Source: BLG Member

 

 

If Mr and Mrs K purchase the new property from their company for market value there will be a charge to SDLT in the amount of £315,750.  A way around this may be to liquidate the company and transfer the property to Mr and Mrs K in the course of the liquidation.

Land transactions for which there is no chargeable consideration are exempt from SDLT.  Distributions in specie of land by a company to its shareholders in the course of a liquidation will fall within the exemption provided that there is no consideration given by the shareholder.

In SDLT Technical News Issue 5 HMRC stated as follows, in the context of de-enveloping property:

‘Transfer of property on winding up – loan from shareowners

We would not seek to argue that the dividend in specie should bear SDLT in a situation for example where A owns the shares of B Ltd. A lends money to the company to buy property, the loan being secured by mortgage on the property.

Later B Ltd is wound up and there is a transfer to A as beneficial owner of the equity. That is the reason for the Transfer. The loan is not released etc., but obviously the mortgage will be taken off as the lender also owns the property because of the liquidation.

Clearly in this scenario A has not assumed any liability or given any other form of consideration.’

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

To be notified when new Q&As are published please sign up for alerts here.