Complex 'Higher Rate' SDLT question

saajan_12

7sefton said:

Why not, when I have never had more than one 'main residence'?

Exactly, you've only had 1 main residence but own 2 properties. The additional 3% SDLT isn't a tax on main residences, its a tax on BUYING additional properties so you own properties that aren't your main residence. 
The exemptions / possible refunds are really to avoid penalising people with properties that are difficult to sell or need some buffer, and have relatively short overlaps in ownership. 

7sefton

What about this scenario:
Home A (previous main residence) is rented out and kept for the long term.
Buy Home B (new main residence), pay +3% SDLT.
Sell Home B and buy Home C (new main residence), still have Home A... 
Would the purchase of Home C be subject to +3% SDLT, considering it will be replacing a previous main residence?

davidmcn

7sefton said:

What about this scenario:
Home A (previous main residence) is rented out and kept for the long term.
Buy Home B (new main residence), pay +3% SDLT.
Sell Home B and buy Home C (new main residence), still have Home A... 
Would the purchase of Home C be subject to +3% SDLT, considering it will be replacing a previous main residence?

No, the "replacing a main residence" concession applies no matter how many other properties you have (assuming, as below, that these are genuine main residences!).

[Deleted User]

7sefton said:

What about this scenario:
Home A (previous main residence) is rented out and kept for the long term.
Buy Home B (new main residence), pay +3% SDLT.
Sell Home B and buy Home C (new main residence), still have Home A... 
Would the purchase of Home C be subject to +3% SDLT, considering it will be replacing a previous main residence?

Maybe, maybe not.  Depends on whether HMRC view it as a contrived attempt to evade tax.  If you're plan is to buy a cheap property B for less than £40k to then quickly sell it in order to buy C then it probably wouldn't work. Have you read the manual for the Higher Rate of SDLT?

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09730

Misericorde

Since we are into the fascinating topic of +3% residential relief, may I ask the following (this is a real case, which I am about to venture into):

I, my Wife and (50 year old) son are joint owners of the property where we have lived together for 15 years. Son has now decided he is getting married (at last!) and is selling his share to us, his parents. Will our purchase of his share incur +3% SDLT? The legislation does not seem to cover this specific point and I have spent all the morning trying to get some sense out of the Government website.

Any takers?

davidmcn

Misericorde said:

I, my Wife and (50 year old) son are joint owners of the property where we have lived together for 15 years. Son has now decided he is getting married (at last!) and is selling his share to us, his parents. Will our purchase of his share incur +3% SDLT? The legislation does not seem to cover this specific point

Yes it does - para 3 (4) (a) of Schedule 4ZA of the Finance Act 2003:

"(4)Condition C is that at the end of the day that is the effective date of the transaction—

(a)the purchaser has a major interest in a dwelling other than the purchased dwelling"

So no, it doesn't apply to a purchase of an additional interest in the same property.

AdrianC

Lover_of_Lycra said:

7sefton said:

What about this scenario:
Home A (previous main residence) is rented out and kept for the long term.
Buy Home B (new main residence), pay +3% SDLT.
Sell Home B and buy Home C (new main residence), still have Home A... 
Would the purchase of Home C be subject to +3% SDLT, considering it will be replacing a previous main residence?

Maybe, maybe not.  Depends on whether HMRC view it as a contrived attempt to evade tax.  If you're plan is to buy a cheap property B for less than £40k to then quickly sell it in order to buy C then it probably wouldn't work. Have you read the manual for the Higher Rate of SDLT?

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09730

But the 3% saved would be 3% of C, not B.

[Deleted User]

AdrianC said:

Lover_of_Lycra said:

7sefton said:

What about this scenario:
Home A (previous main residence) is rented out and kept for the long term.
Buy Home B (new main residence), pay +3% SDLT.
Sell Home B and buy Home C (new main residence), still have Home A... 
Would the purchase of Home C be subject to +3% SDLT, considering it will be replacing a previous main residence?

Maybe, maybe not.  Depends on whether HMRC view it as a contrived attempt to evade tax.  If you're plan is to buy a cheap property B for less than £40k to then quickly sell it in order to buy C then it probably wouldn't work. Have you read the manual for the Higher Rate of SDLT?

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09730

But the 3% saved would be 3% of C, not B.

Not necessarily.  If HMRC deem it to be a contrived arrangement then B wouldn't be a main residence to be replaced with C.

Misericorde

davidmcn said:

Misericorde said:

I, my Wife and (50 year old) son are joint owners of the property where we have lived together for 15 years. Son has now decided he is getting married (at last!) and is selling his share to us, his parents. Will our purchase of his share incur +3% SDLT? The legislation does not seem to cover this specific point

Yes it does -

"(4)Condition C is that at the end of the day that is the effective date of the transaction—

(a)the purchaser has a major interest in a dwelling other than the purchased dwelling"

So no, it doesn't apply to a purchase of an additional interest in the same property.

   Well, thanks davidmcn - so far so good.  But both my Wife and I have a house each which we rent out.  You could say that these are "dwellings other than the purchased dwelling."  I am hoping that these do not affect the issue?

7sefton

Hi again everyone - I’m now completely confused about my situation because after believing for a long time I would be able to reclaim the Higher SDLT (and having it confirmed in this group), my solicitor doesn’t think it would be possible.

To recap:

- I have owned a flat in London as my primary residence for years 

- I started letting this property out in December 2019, as I was moving to Leeds for work and didn’t have the time to sell it. It’s still being rented now.

- Meanwhile I intend to buy this new flat in Leeds and use it as my primary residence. I’m aware I will initially pay the Higher SDLT because I will still own the London flat. 

I genuinely thought I fell into the category of temporarily having two homes when the intention is always to have one. 

Any thoughts?