Stamp duty higher rate: exemption for divorced people?

Naomi_Wolf

Hi all,
My partner and I hope to buy our first home together. I own a property that I have been renting out for years, it is for sale, and when it sells (likely after the purchase of the new house) I should be eligible to claim the higher rate of SDLT (3%) back. My partner, however, who is divorced, and hopes to buy with me, still maintains an interest in his marital home. He pays half its mortgage, and owns 50% of it. He hasn't resided there since seperation began. He has resided, renting, with me. I have asked multiple conveyancey lawyers what his position is, and whether he is exempt from higher rate (the second home tax brought in to penalise landlords) but none can say for certain. I have spoken to HMRC stamps helpline, rather unhelpful also, although two told me they 'suspected' he'd be exempt, but couldn't say for certain. They forwarded me two articles from .gov.uk that outline exemptions for those that must maintain interest in a property after a divorce. But since I have not had a lawyer state my understanding of this to be correct, I still do not know. Is the man exempt from second home tax, since he does not reside at the marital home, nor has he owned one since, and intends to buy a place of residence. His first, since the divorce. What do you think? Divorced home buyer exempt from higher rate or penalised like landlords are? I know that in 2017 the government made an amendment to the previous years landlord penalty since they had not intended divorced couples to be penalised in the same way landlords were, but is this still the case? 
Any information would be greatly appreciated. And thank you.

MovingForwards

@SDLT_Geek can clarify

Doozergirl

I don't know about your partners's predicament, but I got as far as the first few sentences before spotting a stumbling block with your own plan.  

If you own a rental property, it isn't your main residence.  You only get back the 3% if you sell and replace a main residence.  You would have to sell the rental property first for you to not have to pay the additional 3%... You don't get the clawback period on a rental.  

You are a landlord, they're penalising you!  

allconnected

Yup. You pay the 3% surcharge because you own two properties on the day of purchase. The only way you can get this back is to sell a previous (in the last 3 years) main residence. Selling a rental property can’t ever get you the 3% back unless you’ve lived in it as your main residence is the last 3 years. Your partners house is a red herring.

That’s because it’s not a “owning more than one house” surcharge, it’s a “increasing how many houses you own” surcharge - which is why a landlord with half a dozen houses let out can still avoid the surcharge when they change their main residence, but someone who goes from one to two properties  will have to pay.

allconnected.

Naomi_Wolf

That's interesting. I think I am eligible to claw back based on my situation alone, as I bought it as my residence, and have only rented it out due to having to move away from the area for the last two years. What do you think about my partner's situation? A divorced person buying a new home (their first main residence since leaving the marital home to his ex wife, but still pays for half of it)?

AdrianC

Naomi_Wolf said:
I think I am eligible to claw back based on my situation alone, as I bought it as my residence, and have only rented it out due to having to move away from the area for the last two years.

Ah - you said "renting out for years" in your original post, and I certainly assumed that meant more than three...

What do you think about my partner's situation? A divorced person buying a new home (their first main residence since leaving the marital home to his ex wife, but still pays for half of it)?

He owns one house now. He will own two houses at the end of the transaction.
...but...
The former marital property can, AIUI, be disregarded in certain very tightly-defined situations. @SDLT_Geek is the poster you really need here.

One law firm's explainer...
https://www.crippspg.co.uk/tax-traps-on-separation-and-divorce

allconnected

It doesn’t matter who pays for it, it matters who owns it. Will your partner be entitled to a share of the proceeds from the ex marital property when it eventually sells? Then it means the 3% surcharge will be due if you buy together and you won’t be able to claim it back.

if the property is in his name but there’s a court order signing it over to his ex wife eventually that might be different, but as he’s still paying for it I assume that’s not the case.

allconnected.

sheramber

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09797

Divorce and civil partnership dissolution

[Deleted User]

I’ll just deal with the divorce house. If there is a “property adjustment order” in place ( which sounds like a mesher order was made ) there is an exception by HMRC that “that” house will not count as a second house for SDLT purposes. 

Stamp duty geek did post a link a few weeks back, and I did note its contents as my partner is in the same position 

[Deleted User]

https://www.blakemorgan.co.uk/sdlt-surcharge-changes-made-by-the-autumn-budget-on-22-november-2017/

SDLT_geek did post a HMRC link but I cannot find it, but this explains position too 

SDLT_Geek

Naomi_Wolf said:

That's interesting. I think I am eligible to claw back based on my situation alone, as I bought it as my residence, and have only rented it out due to having to move away from the area for the last two years. What do you think about my partner's situation? A divorced person buying a new home (their first main residence since leaving the marital home to his ex wife, but still pays for half of it)?

Based on OP's situation alone, the 3% would be recoverable when her old home is later sold (within three years) so long as she had lived in the old home as her only or main residence at some point within the three years leading up to the completion of the purchase of the new home.

For the partner to escape the 3% surcharge, if still owning a share worth £40,000 or more in the previous marital home, would require a "property adjustment order" to be in place, as others have said.  HMRC confirm it here: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09797