Stamp duty on a main residence purchase

plumberQ

Hello, I'm new to the forum but would like to ask some advice.
My son purchased a property which he started letting whilst he saved up to buy a property with his partner. When he purchased his main residence with his partner he got stung with the higher stamp duty on that property.
He/we want to do a transfer of equity with my husband and myself. ( 1/3 each) of the property that is being let.
Will he be entitled to any of the stamp duty being refunded or does he have to sell it to get the higher stamp duty back?

kinger101

Id your son never lived in property 1, he was not replacing a main residence. No refund of SDLT is available even if the property is sold.

I think there's a slight ambiguity* in the wording of the legislation which might mean if your son lived in the property during the last three years (from when property 2 was acquired) and they subsequently fully dispose of it (within 3 yrs), you might be able to reclaim, but you'd really need a SDLT expert to interpret S117 of Finance Bill 2016 to work that out. You'd still need to qualify residence, which means more than living there for a bit.

As for the subsequent transfer, if any debt is now transferred along with the equity, this will also be subject to SDLT at the appropriate rate. CGT will also apply.

Relevant text;

(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.

*the ambiguity IMO is (c) - the supporting text hasn't really given example where the first property has ceased to be the main residence when the new residence is purchased. But my interpretation it only needed to be at some point during the three years.

booksurr

your son will have to calculate his CGT liability when he disposes ("transfers") ownership to you. Depending on the numbers that may or may not be a large cash sum he will have to pay to HMRC

no he cannot get a SDLT refund since it was never his main home

do you need/want to become landlords with all the responsibility that entails? (as well as paying tax yourselves on the income of course)

plumberQ

Thanks very much for replies. I know when I tried to decipher the ruling for SDLT it was extremely ambiguous.
I still find it very hard to get my head around paying the higher tax on purchase of a main and only residence. If it was buying another property to let, I could understand. Or the tax applied to the only property which was being let.
Thanks anyway.

marliepanda

plumberQ wrote: »

Thanks very much for replies. I know when I tried to decipher the ruling for SDLT it was extremely ambiguous.
I still find it very hard to get my head around paying the higher tax on purchase of a main and only residence. If it was buying another property to let, I could understand. Or the tax applied to the only property which was being let.
Thanks anyway.

It's not a buy to let tax though. It's a tax on multiple property ownership.

Now he has one house, when your son buys the new house he will have 2 houses.

It's not that confusing.