SDLTM04040 - Scope: How much is chargeable: Non-cash consideration: Assumption or release of a debt FA03/SCH4/PARA8

FA03/SCH4/PARA8 provides that the assumption of liability for existing debt is chargeable consideration for Stamp Duty Land Tax (SDLT) purposes.

There is an assumption of debt by the transferee when the rights or liabilities of any party to the transaction are changed in relation to the debt.

Thus a transferee (P) assumes liability not only where he gives a personal covenant but also where the transferor (V) is released from his personal covenant, or where P agrees to indemnify V for any liability.

FA03/SCH4/PARA8(1B) deals with the situation where there is a transfer of property subject to a debt, the transferee assumes liability for all or part of the debt and either before or after the transfer, or both, the property is in joint ownership.

For example property might be transferred from the sole ownership of V into the joint ownership of V and P, or vice versa.

Because a transferee normally accepts joint and several liability for any existing debt concerns had been expressed that transferees might be chargeable on the full amount of the debt even if they acquired only a part share of the property.

FA03/SCH4/PARA8(1B) ensures that in determining the amount of debt assumed each person’s liability for the debt is taken to be a proportion of the debt corresponding to the share that they own in the property subject to the debt.

Examples can be found at SDLTM04040a.