Repayment of SDLT, do we qualify? Confused!

Mopps

Hey all,

Please help as im confused on rules regarding SDLT return.

I have purchased small property (property A)  pre-marriage when i was single, lived there for a year, later we moved in with my then BF at rented property (property , married and had a child. So far, we lived in rented house (B) for 5 years, which has been our main residence. I have been letting my flat A in the meanwhile just to cover the cost of the mortgage. I did NOT convert my residential mortgage to BTL and lender  consented for me to let the flat on residential mortgage. 

We are now planning to buy our first family house (property C). I dont intend to sell my small flat (A) but i may do so after we buy family house (C) and within 3 years of the purchase of the family property C. I understand that if we do it within 3 years i may be entitled for higher rate SDLT return but only if the property A has been our main residence? Technically, porperty A has never been our main residence and rented property B was our main residence, so does it means we dont qualify for  SDLT return?  Do we need to actually move in to the property A in order to qualify for return later? It does seem to be unfair as  we only own one property which has never been purchased with intention to let but to live in, and just because it is too small for family  we needed to rent larger ptoperty and let flat A to cover the cost of the mortagge. 

Grumpy_chap

You started by saying that property A was originally your main residence (just not your BF's main residence or your joint main residence).  I think that satisfies the return of higher rate SDLT so long as the period is within time limits.

Mopps

Grumpy_chap said:

You started by saying that property A was originally your main residence (just not your BF's main residence or your joint main residence).  I think that satisfies the return of higher rate SDLT so long as the period is within time limits.

thanks, its just so confusing as I checked HMRC and they have a test for main residence, it seems like you actaully need to spend most of the time in the place to qualify but the test doesnt specify this particular circumstances, did we/I need to live in the property immediately before pucrhasing another main joint residence C...

AnotherJoe

Why not sell the flat, put the equity into your new house which will give you a better interest rate , and  save you 3% on tax (because AIUI if its not been your main residence for 5 years that is well outside any 3 year limits*) and generally have an easier simpler life?

* Ive seen cases where people have rented for a while and later sold the original but after 5 years theres no way you can claim it was your main residence. t hasnt been your electoral roll or bank address i take it?

Unless you went back to the flat for quite a while, more than a year Id say you are out of luck. There have been cases where people moved back in for a few months and that was ruled as an attempt to evade the tax.

AdrianC

Grumpy_chap said:

You started by saying that property A was originally your main residence (just not your BF's main residence or your joint main residence).  I think that satisfies the return of higher rate SDLT so long as the period is within time limits.

Except it won't be. The OP hasn't lived in A for 5 years already, up to 8 by the time it's sold. Too long.

Mopps

AnotherJoe said:

Why not sell the flat, put the equity into your new house which will give you a better interest rate , and  save you 3% on tax (because AIUI if its not been your main residence for 5 years that is well outside any 3 year limits*) and generally have an easier simpler life?

* Ive seen cases where people have rented for a while and later sold the original but after 5 years theres no way you can claim it was your main residence. t hasnt been your electoral roll or bank address i take it?

Unless you went back to the flat for quite a while, more than a year Id say you are out of luck. There have been cases where people moved back in for a few months and that was ruled as an attempt to evade the tax.

unfortunately, i cant sell property A (my first flat) right now and cant return to live in there - its too small and we really'd like to purchase family joint property now.
I kind of understand the "main residence" rule if people own multiple properties and then just declare the one they sell as their ex main residence but in this case I own only one flat in which i resided and clearly im not making any profit by letting it...

AnotherJoe

Mopps said:

AnotherJoe said:

Why not sell the flat, put the equity into your new house which will give you a better interest rate , and  save you 3% on tax (because AIUI if its not been your main residence for 5 years that is well outside any 3 year limits*) and generally have an easier simpler life?

* Ive seen cases where people have rented for a while and later sold the original but after 5 years theres no way you can claim it was your main residence. t hasnt been your electoral roll or bank address i take it?

Unless you went back to the flat for quite a while, more than a year Id say you are out of luck. There have been cases where people moved back in for a few months and that was ruled as an attempt to evade the tax.

unfortunately, i cant sell property A (my first flat) right now and cant return to live in there - its too small and we really'd like to purchase family joint property now.
I kind of understand the "main residence" rule if people own multiple properties and then just declare the one they sell as their ex main residence but in this case I own only one flat in which i resided and clearly im not making any profit by letting it...

With all due respect, thats irrelevant as to the SDLT rules.

If you can't sell it seems you're on the hook for the extra.

At least you get a discount on what you would have paid if you get a move on.

greatcrested

* Property A is not your main residence, and has not been for 5 years - correct?

* Property B is rented, and is your main residence, and has been for 5 years. Correct?

* you are purchasing property C to make your main residence.

* So currently you own 1 property. After the transaction you will own 2 properties, so you will pay the additional 3% (2nd property) SDLT on property C.

* if you sell property A within 3 years, you cannot reclaim the 3% SDLT as is not your main residence.

That's the legal position.

Morally (on which the legal position is based) you are increasing your property ownership (thus reducing the availability of property on the market) because you have chosen to run a property business.

martindow

Mopps said:unfortunately, i cant sell property A (my first flat) right now and cant return to live in there - its too small and we really'd like to purchase family joint property now.
I kind of understand the "main residence" rule if people own multiple properties and then just declare the one they sell as their ex main residence but in this case I own only one flat in which i resided and clearly im not making any profit by letting it...

Why can't you sell it?  If you are losing money letting it out  it seems pointless keeping it.