UK Landlord Forum / Life

My wife owns two rentals 50:50 with her brother. Her brother has suggested that he transfers his 50% share in one of the properties to her name and she should transfer her 50% in the other property to him. The properties are more or less the same value +/- a few £k. This leaves my wife free to sell her 100% ownership of a single property to realise the cash.


Her concern:

(1) Property A: We would have to each appoint a solicitor to act on our behalf - thus a cost for her and a cost for him.
(2) Property B: We would have to each appoint a solicitor to act on our behalf - thus a cost for her and a cost for her.

(Of course, it would be the same set of solicitors)


(3) They would both have to pay the respective capital gains tax on the sale (CGT) as each transfer would effectively be a disposal.

(4) On acquiring the other 50% of the property, each would have to pay SDLT (at 50% or 100% of the total property value?)

The properties are not their primary address.

It seems much simpler and cheaper to simply sell both properties but the brother wants to keep one property to rent out as it potentially has an attractive yield.

 
It there a more cost effective way of transferring the properties? My wife would then be left with 100% of the cost of selling her property. It just seems a very expensive way to proceed!

For tax purposes (including SDLT), these are sales/purchases at market value. So SDLT and CGT would apply. Conveyancing could probably be done more cheaply - because there isn't really any conflict of interest (although some conveyancers might balk at that approach).

I'd suggest that as the arrangement is at the request of the brother and he's the only person who wants to do it, that they incur the costs arising.

As an alternative, I'd look at changing how they're owned. If the were owned jointly (rather than 50:50), the tax position might be different. I've no idea how that works in tax terms, but essentially, there's a series of title changes that aren't normally tax events.
Tenants in Common to Joint Tenants is (I think) not a tax event, because the tax position before and after is 50:50 ownership. Then severing the joint ownership of each property isn't a disposal. But I've only ever experienced this with a married couple and the rules are specific for spouses. So it's something possibly to explore, but I've no idea if it would really work effectively.

I should have mentioned that one property is mixed use commercial & residential. At the sale price , they would pay zero stamp duty...hence it was an even better deal for them!

It sounds like you're facing quite the decision with the property transfers between your wife and her brother. I understand your concerns about the potential costs and tax implications involved in this process.

Regarding the legal costs, appointing separate solicitors for each property transfer can definitely add up. Have you considered using the same solicitors for both transactions to potentially reduce costs? It's essential to clarify the total fees involved upfront to make an informed decision.

As for Capital Gains Tax (CGT), you're right that each transfer will trigger CGT as a disposal. It's crucial to calculate the CGT liabilities accurately before proceeding with the transfers.

Regarding Stamp Duty Land Tax (SDLT), this will likely apply when acquiring the other 50% of each property, based on the market value at the time of transfer. SDLT rules can be complex, so consulting with a tax advisor or solicitor will help you understand the exact implications and plan accordingly.

Considering your brother-in-law's interest in keeping one property for rental income, it adds another layer to your decision-making process. Exploring alternative transfer structures or seeking professional advice might reveal more cost-effective approaches.

Ultimately, balancing costs, tax implications, and long-term financial goals will be key in making the best decision for both parties. Taking the time to explore all options thoroughly and seeking expert guidance will ensure you navigate this process smoothly.