Avoiding stamp duty surcharge with a temporary main residence

marv9n

Hi all,

My wife and I own a central London flat of around £600k, which I would really like to rent out.

We would look to move further out and are looking at properties of around £500k.

I am also currently in the process of completing on a buy to let of £175k for which I am paying the surcharge in stamp duty (around £6k).

If we decide to make the move eventually I thought it could be a good move to move into the £175k flat for (6 months?) to mark it as a main residence and in turn avoid paying the additional SD on the new place. Would this be possible?

Alternatively, is there anything that stops me purchasing an even cheaper home as a main residence, moving in but then selling that to buy the new home and avoid the surchage again?

Thanks,
Marlon

Cakeguts

Are you going to sell the £600k flat when you move into the £175k one?

Doozergirl

I'd step back if I were you, I believe you may have lit the touch paper.

Doozergirl

Cakeguts wrote: »

Are you going to sell the £600k flat when you move into the £175k one?

Indeed. If you don't sell the main residence, you can't replace it. One doesn't nominate a random house to be the main residence for the purposes of SDLT, it is exactly what it is.

ThePants999

Touch paper aside, I can't actually see a legal problem with this.

If you're living in the £175K flat as your actual primary residence, and then sell it to buy a new one, still owning the £600K flat is surely irrelevant - you are selling your primary residence and buying a new one so the higher rate wouldn't apply. Seems like a valid loophole to me, except that in order to avoid some tax, you're spending a significant chunk of time living in a £175K flat instead of a £600K flat. (HMRC would take some convincing that it really is your primary residence...)

ThePants999

Cakeguts wrote: »

Are you going to sell the £600k flat when you move into the £175k one?

I don't think this is relevant. The OP isn't looking to avoid the higher rate on buying the £175K flat, paying that is a given. They're looking to avoid the higher rate on the £500K property they buy next to move into. With the plan as proposed, at the point of that purchase, the £175K flat is the primary residence and the £600K flat is just a second property.

AnotherJoe

marv9n wrote: »

Hi all,

My wife and I own a central London flat of around £600k, which I would really like to rent out.

We would look to move further out and are looking at properties of around £500k.

I am also currently in the process of completing on a buy to let of £175k for which I am paying the surcharge in stamp duty (around £6k).

If we decide to make the move eventually I thought it could be a good move to move into the £175k flat for (6 months?) to mark it as a main residence and in turn avoid paying the additional SD on the new place. Would this be possible?

Alternatively, is there anything that stops me purchasing an even cheaper home as a main residence, moving in but then selling that to buy the new home and avoid the surcharge again?

Thanks,
Marlon

The main stopper is HMRC. They keep a look out for this.

There was case reported here maybe a year ago where someone moved into a house for a year to do what you are proposing, and HMRC challenged and won stating it wasn't "really" his main residence but was being used as a tax dodge. He did everything you might think of like updating banks, driving licence etc addresses etc.
So essentially its subjective, and there is no actual hard and fast rule such as "six months".
So you'd need to be quite smart about it I think. People downsizing into small places from big ones and then back into big ones is most likely to be flagged by their computer systems and then expect a root and branch investigation in which you are guilty unless proven innocent.

Maybe if you went to the Outer Hebrides, tried crofting for two years in a run down £20k croft you rebuilt, then decided it wasn't for you and moved back to investment banking, they might decide that was OK

G_M

Throwaway1

I never understand why people who can afford a 600k flat, plus buy another cheaper flat, then sell the cheaper one and buy a 500k flat don't just pay the tax they owe. I know we all like to save money but come on.

davidmcn

Throwaway1 wrote: »

I never understand why people who can afford a 600k flat, plus buy another cheaper flat, then sell the cheaper one and buy a 500k flat don't just pay the tax they owe. I know we all like to save money but come on.

I don't understand why they don't get professional advice, rather than rely on what some anonymous weirdos on an internet forum think.

AnotherJoe

davidmcn wrote: »

I don't understand why they don't get professional advice, rather than rely on what some anonymous weirdos on an internet forum think.

I resent that. I'm only partly anonymous.