Additional Stamp Duty confusion

Rick1410

Good evening all, I have managed to stump a couple of Solicitors with my scenario so thought I would see if anyone on here could possibly provide me with some advice.

1. In 2010 I purchased a residential home with my wife.

2. Later that year I was posted overseas with work (crown servant) so we began renting out our property.

3. During my posting my wife and I separated, I bought her out of our property and continued to rent it out.

4. I then purchased a second small property as a BTL which I continue renting out.

5. When my posting ended in 2015 I couldn't afford to move into the residential property so I moved into my parents and continued renting it out.

6. The tenancy is now coming to an end and I want to sell the property, downsize and move out of my parents and into the new home. Preferably whilst keeping the small BTL.

If I did sell and buy a new place to live would I be subject to the higher stamp duty or would the house be considered as my residential property since that was what it originally was? Can my parents house be considered my residential property in this scenario?

Sorry for the long convoluted post, I'm confused and don't seem to be getting anywhere with this. Any advice would be greatly received.

G_M

So you currently own 2 properties?
A) Your original "residential home with my wife" which you now own in your sole name and rent out, and

"a second small propert" which you also own in your sole name and rent out.

Correct?

You wish to sell one of these and purchase another property?

Since you will be buying a 2nd property (you are keeping at least one of the 2 existing properties) you will have to pay the additional SDLT.

The new tax is designed to be levied on people (like you) who have more than one property.

Rick1410

Yes I own 2 properties - the first was the residential property and the second is the buy to let. Having read the HMRC guidance if I lived in the residential property, sold it and purchased a new residential property then I wouldn't have to pay the additional SDLT. (Start with 2 end with 2). However since I live with my parents would they consider neither of my properties residential?

franklee

If it's been let to tenants while you live else where I don't see how it can possible be your own residence. However if you move back in I'm wondering how long you have to live there before it becomes your main residence - you would have to really live there and not still at your parents.

Rick1410

I shall be moving back in when the current tennants move out at the end of this month. I do wonder whether that automatically means that it is my residential property or I have to live there for a certain amount of time before it qualifies.

booksurr

Rick1410 wrote: »

If I did sell and buy a new place to live would I be subject to the higher stamp duty or would the house be considered as my residential property since that was what it originally was? Can my parents house be considered my residential property in this scenario?

the ex marital home would have to have been your actual residence at some point in the 3 years preceding the date of its sale in order for it to meet the condition regarding selling and replacing the main home with a new one. read 3.20.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/509184/GuidanceNote_Final.pdf

in-between selling and buying you can live elsewhere without necessarily owning that place (read 3.24) but given your specific circumstances and history you would unfortunately be unable to capitalise on the transitional arrangements outlined in 3.22 and example 4 because you have not lived in the ex marital home within the 3 year deadline period.

I doubt therefore you can be classed as replacing the main home, so yes the higher rate will apply

G_M

HMRC would make a determination based on the facts. There is no simple formula like 'must live there 3 months'.

If the property was let for 5 years, you evicted the tenants and moved in and immediately put it on the market to sell, HMRC would probobly determine this as not being your primary residence. Whether the property took a month, or 6 months to sell would probobly make little difference. Moving in would be seen as a mechanism to avoid tax on the sale of a commercially let property.

Having said that, how HMRC would obtain all the information on which to make their determination is another question...

booksurr

G_M wrote: »

HMRC would make a determination based on the facts. There is no simple formula like 'must live there 3 months'.

If the property was let for 5 years, you evicted the tenants and moved in and immediately put it on the market to sell, HMRC would probobly determine this as not being your primary residence. Whether the property took a month, or 6 months to sell would probobly make little difference. Moving in would be seen as a mechanism to avoid tax on the sale of a commercially let property.

Having said that, how HMRC would obtain all the information on which to make their determination is another question...

that is an excellent summary of how I understand the position to be as well (FWIW)

Rick1410

It does pose an interesting question though, how long would I need to move back in the property for before it would then be considered my residential property by HRMC.

kinger101

G_M wrote: »

HMRC would make a determination based on the facts. There is no simple formula like 'must live there 3 months'.

If the property was let for 5 years, you evicted the tenants and moved in and immediately put it on the market to sell, HMRC would probobly determine this as not being your primary residence. Whether the property took a month, or 6 months to sell would probobly make little difference. Moving in would be seen as a mechanism to avoid tax on the sale of a commercially let property.

Having said that, how HMRC would obtain all the information on which to make their determination is another question...

The actual text (from Finance Bill 2016) reads;

(6) For the purposes of sub-paragraph (5) the purchased dwelling is a replacement for the purchaser’s only or main residence if—
(a) on the effective date of the transaction (“the transaction concerned”) the purchaser intends the purchased dwelling to be the purchaser’s only or main residence,
(b) in another land transaction (“the previous transaction”) whose effective date was during the period of three years ending with the effective date of the transaction concerned, the purchaser or the purchaser’s spouse or civil partner at the time disposed of a major interest in another dwelling (“the sold dwelling”),
(c) at any time during that period of three years the sold dwelling was the purchaser’s only or main residence, and
(d) at no time during the period beginning with the effective date of the previous transaction and ending with the effective date of the transaction concerned has the purchaser or the purchaser’s spouse or civil partner acquired a major interest in any other dwelling with the intention of it being the purchaser’s only or main residence.

NB - my underlining, but I think the bar for this property becoming OP's main residence again is pretty low. Really, it's just a matter of actually living there again (and setting up the evidence trail for this - bills, electoral register, council tax). HMRC might not like it if he moves in and immediately markets it, but I suspect they'd lose if it went to the Commisioners.

AnotherJoe

kinger101 wrote: »

.....

NB - my underlining, but I think the bar for this property becoming OP's main residence again is pretty low. Really, it's just a matter of actually living there again (and setting up the evidence trail for this - bills, electoral register, council tax). HMRC might not like it if he moves in and immediately markets it, but I suspect they'd lose if it went to the Commisioners.

I think if the OP does everything you suggested bills, electoral register, council tax etc and then puts it up for sale, it wouldn't even raise a glance. Presumably its the solicitors responsible for notifying HMRC, and why would they notify if all evidence was that it was the main residence, which indeed it would be, he'd be living there and paying council tax there. Give it 3 months to move in and do all that, and 3 months to get to exchange, no one would give it a second glance at that point.