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Doing a swap?

Started by monabri, February 27, 2024, 10:48:12 AM

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monabri

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!

jpkeates

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.