Stamp duty when combining two properties

insomniac_ut

Hi,


We live in the upper maisonette of a semi-detached house. The lower maisonette was recently on the market, so we agreed with the seller to make an offer on the condition that the council granted us permission to change the number of dwellings and combine it back into a single house.


The council have granted us permission and we're in the process of completing the transaction. As the two addresses (numbers 31A and 31) will be merged into a single address (number 31), the new property will become our main residence.

So the way I have read the SDLT rules is that we won't pay stamp duty as a second home purchase, but rather as a main home purchase. Am I correct in my interpretation?


Thank you.

scottishblondie

My interpretation would be that at the point the purchase completes you will own 2 properties, which is one more than previously so the surcharge will be due. I think they will take the view that the fact you're going on to combine them into one property after the purchase of the 2nd property is irrelevant to the initial transaction that the stamp duty applies to.

It would probably be worth contacting HMRC to get official clarification on the matter, though, as you wouldn't want to pay it unnecessarily!

davidmcn

scottishblondie wrote: »

My interpretation would be that at the point the purchase completes you will own 2 properties, which is one more than previously so the surcharge will be due. I think they will take the view that the fact you're going on to combine them into one property after the purchase of the 2nd property is irrelevant to the initial transaction that the stamp duty applies to.

I agree with this. SDLT is based on the situation at the point of completion of the transaction. Subsequent merger/splitting/change of use etc is irrelevant. So in this case, you're buying an additional residential property.

AdrianC

davidmcn wrote: »

I agree with this. SDLT is based on the situation at the point of completion of the transaction. Subsequent merger/splitting/change of use etc is irrelevant. So in this case, you're buying an additional residential property.

But 31 will be replacing 31B as your primary residence within the next three years...

G_M

I to suspect you'd have to pay, and then reclaim, the additional 3%.

Unless the merging of the 2 properties is happening simultaneously with the purchase.

davidmcn

AdrianC wrote: »

But 31 will be replacing 31B as your primary residence within the next three years...

G_M wrote: »

I to suspect you'd have to pay, and then reclaim, the additional 3%.

On what basis could they reclaim? There's no disposal taking place.

AdrianC

davidmcn wrote: »

On what basis could they reclaim? There's no disposal taking place.

How many properties do they own before buying 31A? One.
How many properties do they own after? Two, 31A and 31B.
How many properties do they own at the end of it all? One. 31, which is their primary residence...

davidmcn

AdrianC wrote: »

How many properties do they own before buying 31A? One.
How many properties do they own after? Two, 31A and 31B.
How many properties do they own at the end of it all? One. 31, which is their primary residence...

They're not disposing of their interest in the upstairs flat. From the SDLT guidance: "You must have sold your previous main residence within 3 years of paying the higher SDLT rates to qualify for a refund."

AdrianC

Guidance is guidance. It'd be interesting to see the wording of the exact legislation.

Half of me says "Well, yes, of course the 3% is due - you're taking a property out of general circulation"...

davidmcn

AdrianC wrote: »

Guidance is guidance. It'd be interesting to see the wording of the exact legislation.

Schedule 4ZA of the Finance Act 2003 is what you want:
"Part 2
3(1)A chargeable transaction falls within this paragraph if—
(a)the purchaser is an individual,
(b)the main subject-matter of the transaction consists of a major interest in a single dwelling (“the purchased dwelling”), and
(c)Conditions A to D are met.
...
(5)Condition D is that the purchased dwelling is not a replacement for the purchaser’s only or main residence.
(6)For the purposes of sub-paragraph (5) the purchased dwelling is a replacement for the purchaser’s only or main residence if—
...
(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”)"
("major interest" for SDLT purposes meaning ownership or a long leasehold interest)

martindow

If the combination of the two maisonettes could happen simultaneously with paying the money to buy the second wouldn't the OP start and end the process with one property?