SDLT, maybe higher shocker!

lowsideoftheroad

Hello wise forum, long-time lurker etc...

Asking for a friend. ok my wife.
This was entirely news to us in the last week. Forgive our ignorance. Our solicitor seems quite uncertain also...

We are buying a new family home, to live in. Home A.
My wife owned a home before. Home B. She bought it about 10y ago. We lived there as a family for 4y. We then moved for work, and we rented, as the town we moved to was too expensive to buy in. Home B was rented out, but was only last month sold (to our tenants). All good.
The problem...
Two years ago my wife was given (sort of inherited) a quarter-share in a flat in London. The quarter is worth over £40k. The 3 siblings don't want to sell it.
So are we now liable for higher rate SDLT? We have sold our previous 'main residence' only recently, but haven't lived there for 6y now.
The 3% extra on Home A is a substantial proportion of the split-value of the flat. Which hurts. And it would seem in the 'spirit' of the rules, that we are changing our (ex) 'main residence'.

To add spice, our solicitor has suggested that if we dramatically accelerate, we could (outside outside chance) maybe complete before Nov 26th. Seems unlikely.

Suggestions are extremely welcome. Sorry if this has been covered before, I did search, but there are just so many permutations...

AnotherJoe

How much more over £40k is the quarter worth? Would any of the siblings be willing to buy enough (or all) to reduce that liability to less than £40k?

G_M

lowsideoftheroad wrote: »

Asking for a friend. ok my wife.
are you uncertain which? Or is she both? :rotfl:
......

We are buying a new family home, to live in. Home A.
[STRIKE]My wife owned a home before. Home B. She bought it about 10y ago. We lived there as a family for 4y. We then moved for work, and we rented, as the town we moved to was too expensive to buy in. Home B was rented out, but was only last month sold (to our tenants). All good.[/STRIKE]sold so irrelevant
The problem...
Two years ago my wife was given (sort of inherited)how does one 'sort of inherit'? just asking out of interest as it's irrelevant! a quarter-share in a flat in London. The quarter is worth over £40k.
so she already currently owns a property. 'Home A' will be her 2nd property.

The 3 siblings don't want to sell it. OK. But would they like to own it between the 3 of them?

So are we now liable for higher rate SDLT?
Yes of course. see comment above

We have sold our previous 'main residence' only recently, but haven't lived there for 6y now.No. Your previous 'main residence' is the property you currently rent to live in. You are not selling this.

The 3% extra on Home A is a substantial proportion of the split-value of the flat. Which hurts. And it would seem in the 'spirit' of the rules, that we are changing our (ex) 'main residence'.
No. You (your wife) are buying a 2nd property and not selling your current main residence 9which you don't own).

To add spice, our solicitor has suggested that if we dramatically accelerate, we could (outside outside chance) maybe complete before Nov 26th. Seems unlikely.
Gives your wife 12 days to sell her share of the inherited property........

Yes covered before....

lowsideoftheroad

Thanks for the reply...good point.
So we don't exactly know, perhaps £150k. I think it's a bit out of reach for the siblings. Or rather they don't really mind too much about our tax bill.
Would need to be done quite rapidly, before completion?

lowsideoftheroad

We were friends once...yes.
I didn't want to get distracted by the inheritance rules on higher SDLT, which don't apply here, to the best of my understanding. It's not a get out.
I'm sure they'd be very happy to own it between the three of them...but not so keen that they want to buy us out.
The Nov 26th date refers to the 3y limit rule? Is this not relevant? I don't think 12d to complete is realistic anyway, even for super-lawyer.
Thanks for the reply.

G_M

lowsideoftheroad wrote: »

We were friends once...yes.
I didn't want to get distracted by the inheritance rules on higher SDLT, which don't apply here, to the best of my understanding. It's not a get out.
I'm sure they'd be very happy to own it between the three of them...but not so keen that they want to buy us out.
The Nov 26th date refers to the 3y limit rule? Is this not relevant? I don't think 12d to complete is realistic anyway, even for super-lawyer.
Thanks for the reply.

Not sure but I imagine Completion on the sale transfer would need to happen before completion on the purchase.

Tom99

lowsideoftheroad wrote: »

We were friends once...yes.
I didn't want to get distracted by the inheritance rules on higher SDLT, which don't apply here, to the best of my understanding. It's not a get out.
I'm sure they'd be very happy to own it between the three of them...but not so keen that they want to buy us out.
The Nov 26th date refers to the 3y limit rule? Is this not relevant? I don't think 12d to complete is realistic anyway, even for super-lawyer.
Thanks for the reply.

I assume the 3 yrs is from when your wife as beneficiary became a joint owner of this other property. Which date are you starting the 3yrs from, the date of death or the date the property was legally transferred into her name? From the notes:

'The date of the inheritance for these purposes is the date that the individual becomes entitled to the interest. An interest in an unadministered estate is not a major interest in land and so usually the date the individual acquired the interest is the date the interest is transferred to them. Although, see Capital Gains Manual at CG30700 onwards for the situation where the residue of an estate has been ascertained and the personal representative holds the residue of the estate for the beneficiary absolutely.'

lowsideoftheroad

No, I was referring to the rule about disposal of previous main residence (Home . After Nov 26th, you need to have lived there within 3y, prior to Nov 26th however this 3y rule is ignored.
Correct me if I'm wrong here.
Thanks.

Tom99

lowsideoftheroad wrote: »

No, I was referring to the rule about disposal of previous main residence (Home . After Nov 26th, you need to have lived there within 3y, prior to Nov 26th however this 3y rule is ignored.
Correct me if I'm wrong here.
Thanks.

OK, I was referring to the 3yr inheritance rule. Was the 25% 'sort of inherited' inherited following the death of an individual or was it a gift from a living person?

AdrianC

I presume your wife is getting the benefit of a quarter of the rent of this London flat, albeit paying a quarter of the costs...?

SDLT_Geek

If you can complete the purchase of Home A by 26 November 2018 I would expect the purchase to escape the higher rates. Even though your wife has a share in another property "counting against her" (Condition C is fulfilled) she should escape on the basis that of the replacement exception (she fails Condition D).


Transitional provisions apply up to 26 November 2018 so that the three year rules do not always apply (so it would not matter that she did not live in Home B within the three years before buying Home A). See https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09800 and here: https://www.zoopla.co.uk/discover/buying/12-month-countdown-to-escape-second-home-stamp-duty/