Stamp Duty: Higher Rate Confusion

LiamEllison

Hi all

I hope that someone can help me out. I had researched the rules around the Stamp Duty higher rate tax on behalf of my elderly former neighbour. I thought it was relatively straight forward based on reading the Government's consultation paper, the HMRC guidance notes and using an online calculator... however, her solicitor has given a different steer and I would like to know whether I should advise her to a second opinion.

Her situation is that she sold her primary residence in July (about 2 months ago). Since then she has been living temporarily with her daughter whilst house hunting. She now has an offer accepted on another property.

Additionally, her name is on the deeds of a house which she had inherited but which is being lived in by her estranged husband. They have been separated for 10 years, "in circumstances which will be permanent", however they have not divorced.

I felt that it would be clear that she would not face the higher rate because:
1) She is replacing her old main residence (which has sold) with a new main residence,
2) She should not incur a cost based on her estranged husband's situation

I would really appreciate some advice as to whether she should seek alternative advice?

Many thanks

PasturesNew

I believe, but cannot substantiate with a link, that:

She WILL pay the higher rate because it IS a 2nd property, even if she's never set foot in it ...

The inherited one exists, therefore, her new purchase IS a "2nd" one.

It comes down to that .... not which one you're selling ... but the total number you have, irrespective of how you obtained them.

MobileSaver

LiamEllison wrote: »

her name is on the deeds of a house which she had inherited but which is being lived in by her estranged husband.

2) She should not incur a cost based on her estranged husband's situation

Her estranged husband's situation is irrelevant, her name is on the deeds ergo she already owns another property so will have to pay the extra 3% Stamp Duty (assuming the inherited property is worth more than £40,000) when she buys her new second property.

LiamEllison

Thank you PasturesNew for the very quick response.

I agree it is a 2nd property. However, I thought that the guidance make a specific reference to the interpretation of whether the property that was sold and the one being purchased was a "main" residence... e.g. registered to vote from, went to work from etc... In practice, does that not actually matter?

LiamEllison

Do you think that it would make a difference if she sold or gifted her portion of the other property to her husband (i.e. removing herself from the deeds) prior to completing the purchase on the other property?

booksurr

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/509184/GuidanceNote_Final.pdf

the estranged husband's property is not and cannot be classed as her (marital) main home because, OP says, the separation is permanent and the elderly neighbour's occupation of the (now sold) property ticked all the boxes to classify it as her de facto main residence when she lived there, even if not divorced, and with a husband living in another property that she also owns.

Husband's is merely a second property she owns, not her main home
ref: para 3.46

her actual main home has been sold within the last 3 years of the purchase of its replacement (ie the one she is going to buy soon) and the new one will be her main home, and thus qualifies her as going from a main home to a main home under the replacement rule within the 3 year time limit
ref: condition D para 3.16 - 3.24

Additionally, she has no legal interest in the place where she is currently living, so the property she did own, and has sold, retains its status as the most recent main home disposed of, and the one she is about to purchase is effectively its replacement even with the fact there is a time gap between them. She is living rent free in a temporary arrangement pending the new purchase, and has no legal interest in her daughter's house - in simple terms she does not own it nor have a tenancy agreement (implied) to be there which would last more than 7 years!
ref para 3.23 and 3.24

Therefore she is going from owning 2 properties to owning 2 properties where the new one is a replacement of the old (already sold) main residence.

She is exempt from the higher rate

LiamEllison

Booksurr, you are spot on. Thank you very much. For reference, I called HMRC today and they confirmed exactly what you posted. She is exempt from the higher rate and that is what she will instruct the solicitor to act on.


Thanks again