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I currently own property A (main place of residence) with a 60% mortgage.

Property A is valued at £150k, therefore the outstanding mortgage is £90k.

My parents are mortgage free, and still working.

Can I gift them my property + mortgage, then purchase a new home to avoid SDLT.

I would then like them to gift me the property back.

https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property#gift

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  • 5
    You cannot gift someone a mortgage. – Pete B. Jan 4 '17 at 18:53
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    That sounds an awful lot like tax fraud, whether or not it's technically feasible. – Joe Jan 4 '17 at 21:13
  • It's also worth noting that if you gift them property and expect them to gift it back then a) if you have that written in a contract it won;t be considered a gift, but b) if you don't have it written in a contract then they could screw you over. Also you are liable to end up in hot water with IHT as well (see taxationweb.co.uk/tax-articles/… ). This whole scheme sounds like a really bad idea. – Vicky Jan 5 '17 at 8:37
  • @PeteB. the gov.uk website says this "If you get property as a gift you won’t pay SDLT as long as there’s no outstanding mortgage on it. But if you take over some or all of an existing mortgage, you’ll pay SDLT if the value of the mortgage is over the SDLT threshold." – Michael Parkin Jan 6 '17 at 9:57
  • @vicky absolutely, this would require trust that my parents do not just keep the flat. – Michael Parkin Jan 6 '17 at 9:57
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Given that your primary residence has a mortgage, you won't just be able to transfer it to your parents - the mortgage company would normally first want the mortgage to be repaid. Even if they allowed it to be transferred, this would be likely to involve fees, including verifying that your parents and then you were eligible for the mortgage.

Even if your property were mortgage free, you would risk having the transactions be treated as an artificial way to avoid tax, and ignored. In the worst case you could be prosecuted for fraud or tax evasion.

If your scheme did work and your parents died within 7 years, you might find yourself liable to inheritance tax on the "gift" returning your property.

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SDLT is payable only when you acquire a freehold property.

I don't understand your reasons for transferring the property and then reaquiring it as this will have no affect on your SDLT payable.

I believe if your parents take over your mortgage as the remaining amount is below the £125k threshold then no SDLT will be owed by your parents.

SDLT will however be payable upon purchase of a new property. Therefore no matter what you intend to do with your current property a charge will still arise on the new acquisition.

An important consideration however is if the worst was to happen and your parents where to die within 7 years of giving you the asset back then an inheritance tax charge may arise depending on the value of there death estate.

Hope this helps :)

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  • 4
    He's hoping to avoid the extra 3% SDLT payable on a second home. – Mike Scott Jan 4 '17 at 20:22
  • Ahh right, makes sense :) – John Connolly Jnr. Jan 4 '17 at 20:47
  • The first sentence is wrong; SDLT applies to leaseholds too: gov.uk/guidance/stamp-duty-land-tax-leasehold-purchases – Steve Melnikoff Jan 5 '17 at 10:48
  • @SteveMelnikoff why does the gov website say: "If you get property as a gift you won’t pay SDLT as long as there’s no outstanding mortgage on it. But if you take over some or all of an existing mortgage, you’ll pay SDLT if the value of the mortgage is over the SDLT threshold." – Michael Parkin Jan 6 '17 at 9:59
  • I take it back; it seems like it is possible to transfer a mortgage - if the lender agrees. For example: nationwide.co.uk/support/support-articles/manage-your-account/… . Note that one of their conditions is that you can't be removed from the mortgage if you live in the property. – Steve Melnikoff Jan 6 '17 at 10:10

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