Is my understanding of Stamp Duty correct?

AdrianC

SDLT_Geek said:

It is just possible, depending on the order of transactions, that the 3% surcharge would not apply to either the purchase of House B or of House C.  See Example 7 here: https://www.blakemorgan.co.uk/wp-content/uploads/Downloads/SDLT-case-studies-for-3-surcharge-20.01.20.pdf 

It depends on:

1. House B being the only property the couple have an interest in on the day that is completed and not intending to live in it as their only or main "residence".
2. House C being bought on a later date.

Careful advice would be needed though.

I can see selling A and buying B being +3%-free.

But the later purchase of C would not then count as a replacement for A, because the +3% would have been charged due to the ownership of B, and B would not be being disposed of...

What am I missing?

SDLT_Geek

AdrianC said:

SDLT_Geek said:

It is just possible, depending on the order of transactions, that the 3% surcharge would not apply to either the purchase of House B or of House C.  See Example 7 here: https://www.blakemorgan.co.uk/wp-content/uploads/Downloads/SDLT-case-studies-for-3-surcharge-20.01.20.pdf 

It depends on:

1. House B being the only property the couple have an interest in on the day that is completed and not intending to live in it as their only or main "residence".
2. House C being bought on a later date.

Careful advice would be needed though.

I can see selling A and buying B being +3%-free.

But the later purchase of C would not then count as a replacement for A, because the +3% would have been charged due to the ownership of B, and B would not be being disposed of...

What am I missing?

The answer lies in the prescriptive conditions for the "replacement exception" as set out in Finance Act 2003 / Schedule 4ZA / para 3(6).  They are summarised in SDLTM09800 at https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09800.  I did try pasting it, but the formatting went awry.

saajan_12

AdrianC said:

SDLT_Geek said:

It is just possible, depending on the order of transactions, that the 3% surcharge would not apply to either the purchase of House B or of House C.  See Example 7 here: https://www.blakemorgan.co.uk/wp-content/uploads/Downloads/SDLT-case-studies-for-3-surcharge-20.01.20.pdf 

It depends on:

1. House B being the only property the couple have an interest in on the day that is completed and not intending to live in it as their only or main "residence".
2. House C being bought on a later date.

Careful advice would be needed though.

I can see selling A and buying B being +3%-free.

But the later purchase of C would not then count as a replacement for A, because the +3% would have been charged due to the ownership of B, and B would not be being disposed of...

What am I missing?

The property 'causing' the +3% isn't particularly relevant, and doesn't need to be the property being replaced. eg slightly changing the scenario: 
- own A as current residence 
- own B as rental 
- buying C as new main residence on same day as selling A

Then without any replacement exemption, the purchase of C would have +3% because of B which you already own and keep. Due to the exemption, you're replacing A, so the +3% doesn't apply (even though its not . 

The OP's case, if ordered correctly, is the same except selling A happens earlier. If its within the 3 year time limits, then the purchase of C is still a replacement of A, and the property that caused the +3% (B) is still not relevant.