Can we avoid higher rate SDLT?

agentcooper

Any advice/help gratefully received...here is our situation:

• My girlfriend and I currently live in a property I own. She has lived with me here for 16 months but is not on the mortgage.
• I am selling this property and we are co-buying a new property (a new build, if that matters)
• My girlfriend still jointly owns a flat with her ex-husband. He is in the process of buying her out. This process was supposed to complete some time ago but has dragged on and now it is doubtful that this will complete prior to the completion of our new house, The flat is currently rented out to tenants.
• This gives us a possible problem with higher rate stamp duty, If we buy the new property before my girlfriend has been bought our of her flat, we think we will be due to pay higher rate SDLT, costing over £20K

I know there is the possibility of claiming back this higher rate SDLT, if she is released from the flat afterwards. But I am lost in figuring out if this will be successful as it seems to revolve around our "Main residence". Our shared home is not her main residence legally, even though she lives here, and the flat surely can't be her main residence as she hasn't lived there for several years.

If the delay isn't resolved soon our options are to pull out of the new house deal entirely, or go ahead and hope that we can claim back the higher rate SDLT later.

Can anyone advise on whether we would likely be successful in getting the SDLT back?  We have contacted a tax specialist, who was a little vague in terms of whether he thought we'd get it back. We can go back to him but just wondered if there are any experts here who may have a view. Thanks for any advice.

SDLT_Geek

agentcooper said:

Any advice/help gratefully received...here is our situation:

• My girlfriend and I currently live in a property I own. She has lived with me here for 16 months but is not on the mortgage.
• I am selling this property and we are co-buying a new property (a new build, if that matters)
• My girlfriend still jointly owns a flat with her ex-husband. He is in the process of buying her out. This process was supposed to complete some time ago but has dragged on and now it is doubtful that this will complete prior to the completion of our new house, The flat is currently rented out to tenants.
• This gives us a possible problem with higher rate stamp duty, If we buy the new property before my girlfriend has been bought our of her flat, we think we will be due to pay higher rate SDLT, costing over £20K

I know there is the possibility of claiming back this higher rate SDLT, if she is released from the flat afterwards. But I am lost in figuring out if this will be successful as it seems to revolve around our "Main residence". Our shared home is not her main residence legally, even though she lives here, and the flat surely can't be her main residence as she hasn't lived there for several years.

If the delay isn't resolved soon our options are to pull out of the new house deal entirely, or go ahead and hope that we can claim back the higher rate SDLT later.

Can anyone advise on whether we would likely be successful in getting the SDLT back?  We have contacted a tax specialist, who was a little vague in terms of whether he thought we'd get it back. We can go back to him but just wondered if there are any experts here who may have a view. Thanks for any advice.

The key point for being able to reclaim the extra 3% when your girlfriend is bought out is when she last lived in the flat as her only or main residence.  Was it until 16 months ago when she moved in with you? 

The test is whether she last lived in that flat as her only or main residence at some point in the three years leading up to the upcoming joint purchase.

sammyjammy

I see no reason why not, if within (three years?) of purchasing the property together you both cease to own another property you get the higher rate back.

K_S

@agentcooper Not an expert and hopefully I haven't missed anything important in your post, but from what I understand, if your girlfriend has lived in the flat as her main residence at any time in the 3 years before she is bought-out, you may be able to apply for a refund of the 3% surcharge.

agentcooper

Thanks so much for the replies. My girlfriend moved out of the flat she jointly owns with her ex in 2017, so she hasn't lived there in the last 3 years. Between moving out of there and moving in with me, she lived in another rented property.

@SDLT_Geek does that mean we are in trouble, as the flat has not been her main residence in the last 3 years? I'm not sure what her "main residence" actually is, it seems she doesn't really have one, so difficult to replace it! :-( 

Slithery

sammyjammy said:

I see no reason why not, if within (three years?) of purchasing the property together you both cease to own another property you get the higher rate back.

Nope. It has to have been her main residence within the last 3 years and we don't know how long it has been rented out for.

K_S

agentcooper said:

Thanks so much for the replies. My girlfriend moved out of the flat she jointly owns with her ex in 2017, so she hasn't lived there in the last 3 years. Between moving out of there and moving in with me, she lived in another rented property.

@SDLT_Geek does that mean we are in trouble, as the flat has not been her main residence in the last 3 years? I'm not sure what her "main residence" actually is, it seems she doesn't really have one, so difficult to replace it! :-( 

@agentcooper Probably an extreme solution but if you were married, your girlfriend wife can rely on a sale by a spouse (as she has lived in the property personally with you) and so the main-residence exception would apply, saving you from paying the 3% surcharge.

SDLT_Geek

agentcooper said:

Thanks so much for the replies. My girlfriend moved out of the flat she jointly owns with her ex in 2017, so she hasn't lived there in the last 3 years. Between moving out of there and moving in with me, she lived in another rented property.

@SDLT_Geek does that mean we are in trouble, as the flat has not been her main residence in the last 3 years? I'm not sure what her "main residence" actually is, it seems she doesn't really have one, so difficult to replace it! :-( 

Yes, as @K_S says, a later sale by your GF of her interest in the flat will not give rise to an entitlement to a refund of the extra 3% SDLT.  

Your GF's only residence may well have been your property for the last 16 months.  As @K_S says, the analysis would be better if you are married / civil partners by the date of your sale of your property.

GDB2222

Being practical, how about offering girlfriend’s ex a financial incentive to get on with his buying of the flat. Through gritted teeth of course.

silvercar

GDB2222 said:

Being practical, how about offering girlfriend’s ex a financial incentive to get on with his buying of the flat. Through gritted teeth of course.

Or even move back in to the property, given she part owns it.

GDB2222

silvercar said:

GDB2222 said:

Being practical, how about offering girlfriend’s ex a financial incentive to get on with his buying of the flat. Through gritted teeth of course.

Or even move back in to the property, given she part owns it.

The tenants will probably object.