SDLT surcharge and "main residence" confusion

randr1234

Situation:

1. I bought a 1 bedroom flat in Birmingham in 2002.
2. Lived there for ~12 years and paid off mortgage
3. Moved to Bristol for a new job in 2014.
4. Began renting out my Birmingham flat one year later in 2015.
5. Have been living in rented accommodation in Bristol and abroad since 2014.
6. Now buying a 2 bedroom home in Bristol jointly with my girlfriend for ~£280,000...working on a completion date of 19 December 2018!
7. Have not yet sold my Birmingham flat which is currently valued at ~£75,000

Ideally:

1. I'd like to be able to pay standard rate SDLT on Bristol home which will be my main residence
2. Keep the Birmingham flat as an investment and pay the higher rate SDLT surcharge on it.

But I don't think it's possible to designate which is your main residence for SDLT, so...

The next problem:
1. I was expecting to be able to defer the sale of my Birmingham flat and claim a refund of the SDLT surcharge if I manage to sell it within 3 years.
2. But it seems that since the 26 November 2018 I am no longer able to class the Birmingham flat is my main residence, because I've been renting it out for over 3 years.
3. And the refund is only available if you can show that you changed your "main residence".

Is that a correct assessment of the situation?

So I am now considering whether to:

1. Just suck it up and pay the extra £8000 SDLT surcharge.
2. Abandon the purchase of the Bristol place (contracts have not yet been exchanged) and lose the sunk legal and survey costs.
3. Attempt a very quick sale of the Birmingham flat to my parents who will then sell it on later, but have to pay a relatively modest SDTL surcharge themselves.

Are there any other options?
Have I misunderstood anything?

Thanks in advance.

PS I've been referring to the "SDLT - higher rates for additional dwellings" information.

G_M

Began renting out my Birmingham flat one year later in 2015.
Have been living in rented accommodation in Bristol and abroad since 2014.

Clearly it is not your main residence.

Unless you sell it first you will have to pay the 3% surcharge. Selling the flat later will not allow you to reclaim it as it is not your main residence.

AdrianC

randr1234 wrote: »

Situation:

[STRIKE]1. I bought a 1 bedroom flat in Birmingham in 2002.
2. Lived there for ~12 years and paid off mortgage
3. Moved to Bristol for a new job in 2014.
4. Began renting out my Birmingham flat one year later in 2015.
[/STRIKE]5. [strike]Have been[/strike] living in rented accommodation [strike]in Bristol and abroad since 2014.[/strike]
6. Now buying a [strike]2 bedroom[/strike] home [strike]in Bristol jointly with my girlfriend for ~£280,000...working on a completion date of 19 December 2018![/strike]
7. Have not yet sold my [strike]Birmingham[/strike] flat which is currently valued at ~£75,000

That's all HMRC need to know.
You own one property worth £40k+.
You are buying an additional property.
+3% on the additional property purchase.

Ideally:

1. I'd like to be able to pay standard rate SDLT on Bristol home which will be my main residence
2. Keep the Birmingham flat as an investment and pay the higher rate SDLT surcharge on it.

Wouldn't we all like to pay less tax than our situation demands?

1. Nope, because the house purchase is an additional residence. You are not selling your previous main residence. You aren't selling ANY property, but you didn't own your previous main residence, so can't sell it.

2. Nope, because that's not the one you're buying, is it?

00ec25

randr1234 wrote: »

2. But it seems that since the 26 November 2018 I am no longer able to class the Birmingham flat is my main residence, because I've been renting it out for over 3 years.
3. And the refund is only available if you can show that you changed your "main residence".

Is that a correct assessment of the situation?.

this is correct

the fact you have rented were you live in Bristol is ignored for SDLT purposes, but as you say, the 3 year rule catches you out on the sale of your ex main residence since you are now too late to meet the main residence disposal qualification as it ceased to be your residence > 3 years ago

randr1234 wrote: »

So I am now considering whether to:

1. Just suck it up and pay the extra £8000 SDLT surcharge. obvious option #1

2. Abandon the purchase of the Bristol place (contracts have not yet been exchanged) and lose the sunk legal and survey costs.

depends what you want your long term living arrangements in Bristol to be ?

3. Attempt a very quick sale of the Birmingham flat to my parents who will then sell it on later, but have to pay a relatively modest SDTL surcharge themselves.
yes, that is possible, why you expect your parents to suck up the tax is a different matter

are there other options
move back to Birmingham. Re-occupy as main residence for as long as it talks to be convincing that it is in reality your home, then sell up yourself. Bearing in mind such a convincing occupation will be far from easy

as above

AdrianC

You'd like to think that he'll be paying the £2,250 SDLT for the parents, wouldn't you?

dimbo61

1 Have your parents got a spare £80,000/90,000 in the bank earning peanuts ?
2 Would it be a sound investment for them ? Yield ? Condition and easy of renting.
3 Do they want the responsibility of buying a BTL and becoming Landlords ?
This is to save you £8,400

AdrianC

dimbo61 wrote: »

This is to save you £8,400

Not even that much - the OP would have to pay £8,400 extra SDLT on the house purchase, but the parents (I'm assuming they own their home) would have to pay £2,250 on the flat purchase - so the saving would only be £6,150.

randr1234

Thank you all for your replies.


I wish I'd read and posted in this forum earlier.


If I'd know about the 26 November 2018 deadline I would certainly have sold the flat sooner.