Application: Transfer to a connected company: Example 2
Individual A grants a new lease for residential property to company B in consideration of a release from a debt owed by A of £170,000.
SDLT considerations are:
1. Is A connected to B in accordance with S1122? 2. If so what is the market value of the property transferred? 3. What is the rent payable?
If A is not connected to B the chargeable consideration will be the value of the debt released - £170,000 at the rate applicable for residential property at the effective date of the transaction, plus any tax due at 1% on the NPV (less the current threshold) of the rent payable.
If A is connected to B, S53 applies and the chargeable consideration for the transaction will be the market value of the property at the effective date. If this were £275,000 this would be the chargeable amount, plus any tax due at 1% on the NPV (less the current threshold) of the rent payable. If, however, the market value were only £150,000 the chargeable consideration would be limited to that amount.