Stamp duty deterrent for investors?

want2bmortgage3

Has anyone decided not to buy property due to the 3% surcharge? For me it will add 6k to a purchase and it has put me off a little. I wondered what other people think?

kingstreet

I'm sure it has as that's one of the intentions behind it, yes.

VM1305

It hasn't deterred me from buying but will encourage me to sell my investment property within the next 3 years.

We are in rented and rent out my first house which I bought in 2006 so held onto it after the last price crash which really affected values in that area but I got good rental income. We are buying a family home and having to pay extra £10k stamp duty because of second home :eek:

When my tenants move out (expected this year) I am considering selling my rental house and claiming back the extra duty - our solicitors advised you can reclaim from HMRC within 3 years.

I kind of agree with the policy that people should pay extra tax on second homes when we have a housing affordability crisis in many areas of the country, despite being negatively affected by it myself!

Phirefly

VM1305 wrote: »

We are in rented...... When my tenants move out (expected this year) I am considering selling my rental house and claiming back the extra duty - our solicitors advised you can reclaim from HMRC within 3 years.

Are you absolutely certain you will be able to claim it back? We were in the identical situation as you are. We discovered that because we bought our new home while we were living in rented, we were NOT eligible to reclaim the additional 3% sdlt once we sold the house we owned but let out. This is because it wasn't our primary residence when we bought the new house.

I undertook a LOT of research and there are very few circumstances which would except you from this. I strongly STRONGLY urge you read round and get some second opinions. You may have other circumstances which mean you are eligible for a refund but based solely on the information you have supplied in this thread, you definitely will not be.

VM1305

Phirefly wrote: »

Are you absolutely certain you will be able to claim it back? We were in the identical situation as you are. We discovered that because we bought our new home while we were living in rented, we were NOT eligible to reclaim the additional 3% sdlt once we sold the house we owned but let out. This is because it wasn't our primary residence when we bought the new house.

I undertook a LOT of research and there are very few circumstances which would except you from this. I strongly STRONGLY urge you read round and get some second opinions. You may have other circumstances which mean you are eligible for a refund but based solely on the information you have supplied in this thread, you definitely will not be.

Thanks for flagging this with me, this will cause us problems if it's correct

I did a lot of research too and got legal advice but I am re-checking again with our solicitors and I guess I will need to speak to HMRC again too.

There appears to be a lot of different interpretations of the new stamp duty rules. The rented property is in my name and the property we are buying will be in the joint names of my husband and I. Some friends of mine in the exact same situation were told they didn't need to pay the extra duty because the second property was in friend's maiden name and the husband didn't have a second property (I don't think this is correct either).

We also know of several people not even declaring a second property which is in one partner's name when they are buying the new property, and solicitors aren't picking it up in their checks either. This seems like blatant tax evasion to me so we have declared our second home, but planned to sell our other property when we had vacant possession so that we could claim it back within the 3 year period.

Out of interest, when you did your research, did you find out whether you needed to be in your other property as your primary residence for a specific period of time before completing on the second property to be eligible for a future refund of stamp duty?

System

What about the tax relief change?

Phirefly

VM1305 wrote: »

Out of interest, when you did your research, did you find out whether you needed to be in your other property as your primary residence for a specific period of time before completing on the second property to be eligible for a future refund of stamp duty?

We had an offer accepted on a property in July, were aware of the upfront 3%, but believed we could reclaim it once our rental had sold and were already in the process of ending our tenants occupancy and planning to refurbish our house to put on the market at some point. It wasn't until the day we put our house on the market that we discovered we would not be eligible for the refund if we completed on our purchase first. We were 3 weeks from exchange on the house we are buying. If we completed before selling the other property, we would be eligible to pay £13.5K on top of the standard £12.5K and we would not be able to get it back.

Cue sleepless nights, much fretting and raking the internet for information. We too found lots of misleading and contradictory information. Our solicitors were adamant that we would not be able to claim a refund without lying on the claim form. We sought advice from a senior partner expert in real estate at Grant Thornton LLP, one would struggle to find a more informed person on the topic, who confirmed that our solicitors were correct.

We could have ended our tenancy, moved back in to the rental property we own, changed addresses, electoral register and essentially made it our primary residence prior to completion on our purchase. HMRC do not have a time period guideline on this but according to experts we consulted, it's too early to say whether this would mean HMRC would agree that this constituted our PERMANENT primary residence as there are as yet no precedents, it being such new legislation. Its the intention for it to be 'permanent' that is the sticking point, legally. We were directed to existing similar CGT cases whereby people have essentially done the same thing to avoid CGT, in some cases living in the formerly rented property for close to a year but have still been found by HMRC to be evading tax. Those we consulted predicted that HMRC would be taking a similar approach to additional SDLT evasion and using CGT cases as benchmarks. But our solicitors, accountant and the Real Estate expert all said it might be worth a try, but risky as no-one really knows. Our accountant also advised us that HMRC will be undertaking increased audits in this first three years so it would be highly likely we'd be investigated.

The other option we were advised of would be to set up a trust (via a company like Grant Thornton) and gift the house to the trust on the proviso that they sell it and you receive the proceeds. This is a legal, legitimate option, but can be extremely costly. That said, it is what we would have done as it would probably have been less than half of the SDLT we were liable for.

I'm not surprised people are lying about not owning another property. But this IS blatant tax evasion as you say and they'll be in big trouble if they get caught. I personally couldn't sleep at night if I lied to HMRC about something that big. Being self-employed, my husband and I rely on our clean records and cash flow to trade and prosper. There have been CGT cases which have involved hefty fines and in some extreme cases, custodial sentences. I have a small child and the worry of even the slightest chance of extreme penalties is too much to live with for me.

There might be some grey areas over unmarried couples and names on deeds, but the Qs and As on the forms are very black and white as far as HMRC see it in your circumstances. You own a property that is not your primary residence. You buy another property. You MUST pay the additional 3%. You can ONLY claim the refund if, once you sell the first property, you can say it was your primary residence when you bought the second one. (Unless you sold a primary residence prior to renting) You'd have to be able to prove in court that that property really WAS your permanent primary residence and you hadn't just moved there to evade tax.

Its a real !!!!! as us renting landlords seem to be the only ones who have not been given a concession on this. The government brought out amendments to the rules but they did not include renting landlords who hadn't sold a primary residence. They have also admitted that this is an unintended inverse loophole, but have confirmed they have no intention to address it.

I agree with what you said upthread that ostensibly, I welcome anything that controls the BTL market in this way but you and I have basically been shafted, becoming accidental landlords when we found ourselves in NE, then trying to carefully mitigate our losses by letting and renting until we're back on our feet, then screwed when we are finally in a position to buy. There's loads of us out there.

Phirefly

Relevant FT article
Another article detailing the concession if you sold your primary residence prior to renting

Phirefly

This contains quite a good, clear summary

VM1305

Thanks Phirefly, that's really comprehensive and you've obviously done your research!

I have phoned the stamp duty section of HMRC and explained my circs - rented property was originally my primary residence in my name only, I let out since I got married and now I am buying a house in joint names with my husband who has no other properties in his name.

HMRC have said I do have to pay the higher rate but if I sell my rented house within 3 years I CAN claim back the sdlt. There is so much conflicting advice on their website so I've demanded they put this in writing to me!!

As if house buying and selling wasn't stressful enough already!!! Bloody George Osborne has a lot to answer for! Yes I agree it's not fair on people like us trying to do the right thing. If I wanted to keep on a second property as an investment then fair enough - I'll pay the tax.

Argh :eek::eek:

Phirefly

I'm really glad that's confirmed, and a really good idea to get it in writing too. There's absolutely nothing anywhere that I've found that states that to be the case in your circumstances, in fact, quite the contrary which is massively unhelpful for others who might find themselves in your shoes. Great news that you can claim a refund!!

Sorry to have harped on but his has very much been my life for the past couple of months and if I can help just one person avoid the stress we've had it'll be worth it.

Luckily we sold our house for its full valuation price 3 days after it went on the market so everything is crossed for speedy conveyancing!