Chapter: 2 - Inheritance Tax Mitigation: The Basics

Stamp Duty Land Tax

2.14.3

A gift, pure and simple, of land and buildings does not attract SDLT (FA 2003 Sch 3 para 1), just as under Stamp Duty a gift of shares can be certified as attracting no Duty (The Stamp Duty (Exempt Instruments) Regulations 1987 SI 1987/516).  But if the land is subject to a mortgage or is transferred in consideration of the removal of a debt, the amount of the mortgage or debt constitutes chargeable consideration for SDLT purposes (FA 2003 Sch 4 para 8).  So, with residential land, if the mortgage debt exceeds £125,000 (£175,000 for transfers after 2 September 2008 and before 1 January 2010), the nil-rate threshold, there will be SDLT to pay.  And in any case there will be compliance implications for making the transfer for a deemed consideration of £40,000 or more (£1,000 or more before 13 March 2008).

There is a further point.  If land is transferred to a company with which the transferor is connected (within the meaning of TA 1988 s839) or in consideration of shares in a company controlled by the transferor, the consideration is deemed to be not less than the market value of the land – ie it could be more if such actual consideration is paid, but cannot be less (FA 2003 s53).  A similar rule applied under Stamp Duty prior to 1 December 2003.  This may be an unlikely thing to happen, though the point should be borne in mind, eg with the grant of a lease to a family company as part of IHT planning arrangements: see 6.6.1.