SDLT on jointly inherited property that is main residence?

I have a query regarding SDLT and transfer of equity on a jointly inherited property. I have inherited a 50% share in a property and am in the process of buying my siblings’ shares (25% each), I came across guidance notes for “Stamp Duty Land Tax: higher rates for purchases of additional residential properties” published by HMRC on 16 March 2016.

I think the following excerpt may be relevant to my position.

The same Conditions are used for each purchased dwelling or the purchaser as for an individual purchasing one dwelling, although Condition A is modified. Not all of these tests must be met for a purchase of two or more dwellings to be liable to the higher rates.

• Condition A – the chargeable consideration attributable to the dwelling on a just and reasonable basis is £40,000 or more;
• Condition B – the dwelling is not subject to lease which has more than 21 years to run on the date of purchase;
• Condition C – the purchaser owns an interest in another dwelling which has a market value of £40,000 or more and is not subject to a lease which has more than 21 years to run at the date of purchase of the new dwelling; and
• Conditions D – the dwelling being purchased is not replacing the purchaser’s only or main residence.

My particular situation is as follows :-

When my wife and I married we individually owned one property each. Mine is a leasehold flat (100+ years left on lease). We decided mine would then become a buy to let and we moved into my spouse’s property (freehold) .

Six years ago when my father passed away we moved into my parents’ home (freehold property) with my mother. So at that point my spouse’s property (our former main residence) became a buy to let.

My mothers home then became our new main residence.

My mother passed away 11 months ago and we continued to live in the property.

My mothers home and assets were left (according to her will) half to me and a quarter to each of my (two) sisters.

The mortgage left on mums loan is £35k and the property is valued at £235k.

Since my mother passed away – the executor has met the mortgage payments.

The grant of probate has now been given to the executor and the net value of the estate was certified to not exceed £200,000.

My wife and I have decided to continue to live in the property and take out a joint mortgage to repay mums loan and take over the share that belongs to each of my sisters.

Since April 2016 HMRC rules have changed regarding SDLT and owning two or more properties.

Will the remortgage and transfer of equity incur any SDLT ?

Will there be 3% surcharge on existing Stamp Duty rates ?

What will be the chargeable consideration ?
Is it
a) £35,000 (mum’s loan). or
b) £135,000 (the total we need to borrow to repay the mortgage and take over the siblings’ shares) or
c) £100,000 (siblings’ shares) (I think most likely) or
d) no chargeable consideration because this is an inherited property and our main residence and the interest was inherited less than three years before the chargeable transaction then it will not count as an interest in another dwelling at the end of the day of the effective date of the chargeable transaction. (From HMRC website!).

From reviewing the information on the HMRC website it seems that no Stamp Duty is payable on properties that are inherited, so the 3% premium will not be relevant. But what is the ruling on transfer of equity ?

If the 3% premium does not apply because this property is our main residence, then if the chargeable consideration is under £125k would the stamp duty be nil ? or if it does apply will it be £3k ?
As I understand it the new stamp duty premium applies if the main residence is NOT being sold. However in our case there is an argument to say because the main residence is subject to a transfer of equity this could constitute a sale and a purchase of our main residence – so then the new premium on SDLT would not apply ?

Needless to say this is a highly confusing area .
I have appointed a solicitor for the TOE and conveyancing (for new mortgage) but as this is new legislation I thought it best to investigate myself.

All comments gratefully received !

Mountgrove

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