Mother owns house valued at £150,000 free from mortgage.
Son owns house valued at £225k with £100k mortgage. Son pays £30k off mortgage from own funds and mother gives son £70k to fully repay mortgage.
Both then decide to swap houses by way of two deeds of gift for nil consideration.
Is this effectively an exchange of properties and SDLT is chargeable on both transactions at the values of £150k and £225k?
The strict position is that both pay tax on £225K. However based on the concessionary treatment outlined in SDLTM04020A the mother would pay tax on £225k and the son on £150k on the basis that he has made a gift to his mother of the difference in value between what he is transferring and what he is receiving. Logically the mother should also pay tax only on £150k because she has received a gift of £75k but the concession only seems to go so far. In this instance I don’t think that the mortgage repayments affect the position.
Patrick, can’t you argue that if properly documented your scheme works so that son is in effect gifting a 1/3 share in his £225k house (worth £75k) to his mother and swapping the remaining 2/3 share (worth £150k) for his mother’s £150k house? In my view the legislation is not unambiguously clear that you cannot do that and I think there was some discussion in the STPG a few years back that that should work.