Stamp duty when consolidating equity for own home

AdrianC

What's the value of your portion of your existing house? If <£40k, then it's all academic, because it doesn't count for +3% purposes.

If over, then - yes - +3%. Would your siblings buy your share out?

saajan_12

zoefox565 wrote: »

I have a similar question but I'm not sure how I start a new post. My mum gave me and my siblings a house a few years ago, - how long ago and what was the value then? which none of us live in (it is currently being done up to be sold but won't be ready for a while). - when will it be sold and what is the value in the new renovated condition? Is it more than 40k? I currently live in rented accommodation with my husband who is a first time buyer and we have just had an offer accepted on a house which we intend to live in as our forever home. - Then you likely have several weeks left in the process.. has the chain formed yet? Is there a target / estimated completion date? Can you delay this to after your mum's property sells? Does anyone know what stamp duty we will have to pay? As far as I know, we won't be eligible for any first time buyer reductions as only my husband qualifies but I don't know about the 2nd home charge. - If you buy now and your share in the joint property is over 40k, then you'll own 2 properties and be liable for the higher rate stamp duty on the purchase. No refund if you subsequently sell your share as you never lived there as your main residence. I'm hoping we won't have to pay this as it is unoccupied and not rented out. - Rental or unoccupied is irrelevant, only if you lived there yourself as your main residence, there are some exceptions.
If not, I may have to have my name removed from the deeds of the other house as that will be considerably cheaper than the additional charge. - Yes, you'll have to divest your share to avoid the additional rate charge. Either wait till the property sells on the open market, or your siblings buy you out.

If you buy a new property while you still own a share in one property over 40k, you'll be liable for the higher rate SDLT on the full purchase price. As the first property wasn't your main residence, even if you subsequently sell it, you won't get any refund.

Solution: Divest your share in the original property, either by waiting until it sells on the open market or your siblings buying you out. Note whenever you sell, this will trigger CGT on the increase in value of your share from when you were first gifted it, less the 11.3k annual allowance, assuming you haven't made any other capital gains this year.

SDLT_Geek

No one has asked zoefox565 yet whether she has previously owned a property which she lived in but which has been sold / disposed of. That might make a big difference because of the exception from the 3% surcharge for the replacement of an only or main residence. Particularly if the purchase is to complete by 26 November 2018.

SDLT_Geek

crested_grebe wrote: »

oh thank you, SDLT Geek, you're a star!! I will have a proper look at the full reference tomorrow, brain fog descending now! But on first glance it looks like I already qualify for exemption so long as I intend to live in the new home (having already disposed of a previous main home) if the purchase completes by 26th Nov 2018.

(Wondering do I have to move in immediately, or does *intend* followed up by definitely moving in (for years!) give some flexibility time-wise as the house needs work before I can move in, plus it would keep open the possibility of purchasing quicker on a BTL (then remortgaging soon after) if the sale of the other hasn't released enough funds in time...hope the original wording clarifies this!)

Alternatively, if the purchase completes AFTER 26 Nov 2018 (but before June 2019), then I have actually lived in both the already sold one, and the one being sold within the past 3 years...but not for the ENTIRE 3 years, so again hoping they specify whether part or entire 3 years is needed!)

I think?!! No wonder the accountant decided to pass on this one!

Picking up on your points here:

1. For the replacement exception to apply it is important that (at the moment of completion of the upcoming purchase) you intend to live in the new property as your only or main residence (so with the necessary degree of permanence and expectation of continuity). But the HMRC guidance accepts that this test can still be fulfilled if one does not move in straight away until some works are done.

2. To fund the purchase with a BTL mortgage would provide some evidence against that intention and would take some explaining!

3. Looking now at the "sold" property: you do not have to have lived in it throughout the three years leading up to the forthcoming purchase, just at some time within those three years. But you do need to have lived in it as your only or main residence. So a degree of permanence and expectation of continuity is required. Occupation as a short term or stop gap measure would not be enough.

HMRC have now moved their guidance from the 38 page pdf to their Manual. The index page is here: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09730 Mostly the wording is the same, but there are changes.

• The transitional provisions for replacement purchases by 26 November 2018 are not explained so well.
• They mention that to live in a property as a "residence" requires a degree of permanence and expectation of continuity.
• They have updated it for the changes made by Autumn Budget 2017 for completions on and after 22 November 2017.

crested_grebe

Thank you SDLT Geek, that's helpful. Apologies for the slow response, had to take time out from this due to health! The new property DOES need some work doing before I move in (damp issues) and I am only thinking a BTL mortgage might be needed temporarily IF I can't complete on the other sale in time to release enough deposit for a personal mortgage (I can only get a small one as my income is so low). Both properties (sold, and being sold) have legitimately been (and declared as such) my own home for substantial amounts of time, so hopefully the exemption applies. I can see why rules are needed to stop people abusing the exemption but it's a shame it's so complex!!