Before 1985 ad valorem stamp duty was payable on a gift.

An exemption was then enacted by s.82 of the Finance Act 1985: category L of The Stamp Duty (Exempt Instruments) Regulations 1987 now covers 'the conveyance or transfer of property operating a voluntary disposition inter vivos for no consideration in money or money's worth nor any consideration referred to in s.57 of the Stamp Act 1891 (Conveyance in Consideration of a Debt etc).'Straightforward gifts therefore are covered by category L and subject to appropriate certification will not attract the £5 fixed duty provided by para 16 sched 13 of the Finance A ct 1999 on a conveyance or transfer of property otherwise than on sale.

However, the problem is s.57 of the Stamp Act 1891, which provides that 'where any property is conveyed to any person in consideration, wholly or in part, of any debt due to him, or subject either certainly or contingency to the payment or transfer of any money or stock, whether being or constituting a charge or incumbrance upon the property or not, the debt, money, or stock is to be deemed the whole or part, as the case may be, of the consideration in respect whereof the conveyance is chargeable with ad valorem duty'.The transfer of property in satisfaction of a debt will be covered by s.57.

Happily, s.102 of the Finance Act 1980 provides that the stampable consideration cannot exceed the value of the property transferred.More frequent, however, is an intra-family transaction involving a gift of land which is subject to a mortgage.

The debt could have arisen in connection with a business transaction, for example a loan by the agricultural mortgage corporation to a farming partnership to enable it to acquire land secured on that land.

Alternatively, the debt may be a personal one having no business or other connection in particular with the property secured.

It is typically in family transactions which look like gifts, but which involve somewhere along the line the assumption of a liability, that the rule in s.57 is likely to apply.The stamp duty issue, and analysis, is set out in Inland Revenue statement of practice SP 6/90.

The critical question is what happens to the liability for the mortgage as between the donor and the donee.

That is the primary issue, regardless of what happens, perhaps separately, to the legal title and the beneficial interest in the property.

The Stamp Office is not concerned with the fact that the rights of the lender are unaffected; it is the relationship between the donor and the donee that matters.The issue is identified by paras 5 and 6 of SP 6/90 as this: if the liability of the debt remains with the donor and no covenants are given by the donee, there is no conveyance or transfer on sale and the instrument can be certified category L.

On the other hand, if it is clear (either from the instrument itself or by a separate document) that the donee takes on his or her share of the liability, that agreement discharging the donor or donors to that extent will be consideration for purposes of s.57 and will make the transaction a sale for stamp duty purposes.

Para 7 of the SP warns that even where the donee gives no express covenant or undertaking such a covenant may be implied (except in Scotland).

However, any such implication will be negated if there is evidence that when the transfer was made the parties intended that the donor alone should continue to be liable for the whole of the debt.As a practical matter it is best to make it clear in the deed of transfer itself that the donee is accepting no liability for the debt and that the donor will continue to be liable for the whole of the debt (if, of course, that is intended).

In a case where there is more than one borrower there will be 'joint and several' liability: simply leaving that position as it stands will not be enough to avoid stamp duty.

Para 9 of the SP makes it clear that, if husband and wife together transfer the property subject to a mortgage into the sole name of a wife, a covenant by the wife to indemnify the husband can be implied and will not be avoided by the argument that the wife was jointly and severally liable for the whole of the debt before the transfer .Notwithstanding the joint and several liability point, the Stamp Office accepts that the chargeable consideration is only such a part of the debt as is proportionately equal to the beneficial share in the property passing.

This means that if husband and wife jointly own Blackacre, worth £200,000, subject to a mortgage of £100,000 and together they transfer Blackacre into the sole name of the wife, the £60,000 certificate can apply to relieve any stamp duty chargeable, since the consideration given by the wife is treated as being only one half of £100,000, viz £50,000.Supposing the aim is to transfer intra-family property subject to a liability and the donee's share of the liability is going to exceed £60,000, could there be a series of gifts such as the share of the liability transferred on each gift does not exceed £60,000? The issue is always whether it can be said that a particular transfer is not 'part of a series of transactions or of a larger transaction' formula in the certificate of value.

This will depend on the circumstances though the argument against the application of the formula is in principle that at the date of one gift there is no obligation on the transferor to make a further gift.Always consider the terms of the borrowing.

Often it will be a requirement of the loan that there may be no dealing in the property without the express consent of the lender, and it may well be best to join the lender in the document.

Of course, if the dealing is in the beneficial interest only and not in the legal title, it may be possible to bypass the lender (although perhaps technically a breach of the loan).

Certainly a gift to the beneficial interest only might be the easiest way of getting round the SP 6/90 problem, since the loan would continue to attach the legal title only and the subject matter of the gift would disregard the existence of the loan.

Even so, any implied undertaking by the donee to pay the mortgage should be negatived.Could the principle behind SP 6/90 be avoided by the following stratagem? Suppose that the father wishes to make to his son a gift of Blackacre, worth £500,000, on which is secured a liability of £200,000 which is desired that the son should assume.

There is no issue as to income tax relief on the interest.

The loan is made by the father's clearing bank.The father has no alternative security to offer.

The bank agrees to release the father from the liability secured on Blackacre, so long as either it does not part with the possession of the documents of title or, if it does -- for example, to the family's solicitors -- the solicitors hold the documents to the order of the bank.

It is envisaged that following the gift the son will charge Blackacre to the bank.There are various ways in which such a transaction might be structured in detail.

In any case, Blackacre is released from mortgage and given to the son.

The son then charges Blackacre and receives £200,000.

That money is used to discharge the father's temporary indebtedness.

Clearly, consideration is seen to move from the son to father and the transaction will be caught by the spirit, if not the letter, of SP 6/90.

It might be described as 'textbook Ramsay'.

This example illustrates the need to think through carefully, in advance, the detail of the transaction.

(If the gift is to be made clearly free of mortgage, the father must raise £200,00, for example, by way of loan from another source, to discharge the secured liability.)This analysis is confirmed by paras 4.42 to 4.44 of the Stamp Office Manual.

The moral is that g ift structures which rely on highly artificial arrangements (in what might turn out to be a vain attempt to circumvent s.57) should be avoided.Think through carefully the possible ambit of s.57 in any gift of property where there is a borrowing secured on the property, in relation to other taxes too, to ensure that before the document is signed the right result is achieved.