Refund of SDLT on second home buying for divorce / separation

Spaneng

Hello,

I am trying to get my head around how exactly the SDLT on second home buying for divorce / separation works for sorting out my separation, and would like your help to see if I am understanding things right.

• I am already separated from my ex, living separate lives but we have been cohabiting for a while (since October last year, so ex can claim benefits while still under the same roof) - we decided on this so I can find something suitable for me to move and have the kids 50% of the time.
• Currently ex does not work, but actively looking to, and I estimate probably will get a job in 3-6 months
• To avoid selling the main house, I decided to free some equity when remortgaging last year, and use that as a deposit for a second home
• I have an agreement with ex that the money I have to pass is the mortgage payments (i.e. I keep paying the mortgage myself and don't pass any more money) - I asked for this because the mortgage is still jointly to both of us and if ex did not pay I would be in trouble, and is exactly the same as ex would be entitled according to online divorce calculators (once ex gets a job and can take on mortgage, this will change, obviously)
• I have an offer for a property accepted now, and looking to progress the purchase
• I was aware I had to pay additional rate of SDLT on this property, but I have been made aware I might be able to claim that back afterwards (which would be a good sweetener).

What I am struggling to understand is the timings of the process (max 3 years? since I move). Hence, I am putting below an example (not real numbers but close enough to real situation).

• Let's assume new property is worth £200,000. Hence SDLT would be 3% additional, £6,000
• Once I buy that property, I would jointly own first house (FMH - let's call house A) and also own solely house B
• After I move to house B, I will sort out divorce. Most likely ex will get house A (assume to be worth £240,000, but ex will be entitled to more than 50% for being at home looking after kids while I worked - i understand this), and I will get house B (worth £200,000 as per above).
• I would them claim a rebate of the SDLT for house B

Am I understanding this right? Is this possible? 

Many thanks in advance 

SDLT_Geek

Spaneng said:

Hello,

I am trying to get my head around how exactly the SDLT on second home buying for divorce / separation works for sorting out my separation, and would like your help to see if I am understanding things right.

• I am already separated from my ex, living separate lives but we have been cohabiting for a while (since October last year, so ex can claim benefits while still under the same roof) - we decided on this so I can find something suitable for me to move and have the kids 50% of the time.
• Currently ex does not work, but actively looking to, and I estimate probably will get a job in 3-6 months
• To avoid selling the main house, I decided to free some equity when remortgaging last year, and use that as a deposit for a second home
• I have an agreement with ex that the money I have to pass is the mortgage payments (i.e. I keep paying the mortgage myself and don't pass any more money) - I asked for this because the mortgage is still jointly to both of us and if ex did not pay I would be in trouble, and is exactly the same as ex would be entitled according to online divorce calculators (once ex gets a job and can take on mortgage, this will change, obviously)
• I have an offer for a property accepted now, and looking to progress the purchase
• I was aware I had to pay additional rate of SDLT on this property, but I have been made aware I might be able to claim that back afterwards (which would be a good sweetener).

What I am struggling to understand is the timings of the process (max 3 years? since I move). Hence, I am putting below an example (not real numbers but close enough to real situation).

• Let's assume new property is worth £200,000. Hence SDLT would be 3% additional, £6,000
• Once I buy that property, I would jointly own first house (FMH - let's call house A) and also own solely house B
• After I move to house B, I will sort out divorce. Most likely ex will get house A (assume to be worth £240,000, but ex will be entitled to more than 50% for being at home looking after kids while I worked - i understand this), and I will get house B (worth £200,000 as per above).
• I would them claim a rebate of the SDLT for house B

Am I understanding this right? Is this possible? 

Many thanks in advance 

For a reclaim of the 3% surcharge payable on house B to be possible, it is important that at the time of your purchase of it you and your spouse are separated in circumstances likely to be permanent (not cohabiting).  To trigger a right to a refund you would need to part with all of your interest to your ex within three years.

If you did things in a different order, you might not have to pay the extra 3% at all.  There is guidance here https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09797 about the effect of obtaining a "property adjustment order" in respect of house A before you complete the purchase os house B.

Note that the 3% surcharge might be increased in the 15 March 2023 Budget.

Spaneng

SDLT_Geek said:

Spaneng said:

Hello,

I am trying to get my head around how exactly the SDLT on second home buying for divorce / separation works for sorting out my separation, and would like your help to see if I am understanding things right.

• I am already separated from my ex, living separate lives but we have been cohabiting for a while (since October last year, so ex can claim benefits while still under the same roof) - we decided on this so I can find something suitable for me to move and have the kids 50% of the time.
• Currently ex does not work, but actively looking to, and I estimate probably will get a job in 3-6 months
• To avoid selling the main house, I decided to free some equity when remortgaging last year, and use that as a deposit for a second home
• I have an agreement with ex that the money I have to pass is the mortgage payments (i.e. I keep paying the mortgage myself and don't pass any more money) - I asked for this because the mortgage is still jointly to both of us and if ex did not pay I would be in trouble, and is exactly the same as ex would be entitled according to online divorce calculators (once ex gets a job and can take on mortgage, this will change, obviously)
• I have an offer for a property accepted now, and looking to progress the purchase
• I was aware I had to pay additional rate of SDLT on this property, but I have been made aware I might be able to claim that back afterwards (which would be a good sweetener).

What I am struggling to understand is the timings of the process (max 3 years? since I move). Hence, I am putting below an example (not real numbers but close enough to real situation).

• Let's assume new property is worth £200,000. Hence SDLT would be 3% additional, £6,000
• Once I buy that property, I would jointly own first house (FMH - let's call house A) and also own solely house B
• After I move to house B, I will sort out divorce. Most likely ex will get house A (assume to be worth £240,000, but ex will be entitled to more than 50% for being at home looking after kids while I worked - i understand this), and I will get house B (worth £200,000 as per above).
• I would them claim a rebate of the SDLT for house B

Am I understanding this right? Is this possible? 

Many thanks in advance 

For a reclaim of the 3% surcharge payable on house B to be possible, it is important that at the time of your purchase of it you and your spouse are separated in circumstances likely to be permanent (not cohabiting).  To trigger a right to a refund you would need to part with all of your interest to your ex within three years.

If you did things in a different order, you might not have to pay the extra 3% at all.  There is guidance here xxxxx about the effect of obtaining a "property adjustment order" in respect of house A before you complete the purchase os house B.

Note that the 3% surcharge might be increased in the 15 March 2023 Budget.

Thank you for your reply,

Ex has been already successfully claiming Universal Credit  for some months, and to be eligible has stated we have been separated since last October - is this evidence enough?

I will have a look at the guidance you sent, many thanks. I was aware we could maybe do things different to avoid paying the 3% surcharge, but the emotional toll of the separation / divorce is too much to add dealing with the divorce right now.

SDLT_Geek

Spaneng said:

SDLT_Geek said:

Spaneng said:

Hello,

I am trying to get my head around how exactly the SDLT on second home buying for divorce / separation works for sorting out my separation, and would like your help to see if I am understanding things right.

• I am already separated from my ex, living separate lives but we have been cohabiting for a while (since October last year, so ex can claim benefits while still under the same roof) - we decided on this so I can find something suitable for me to move and have the kids 50% of the time.
• Currently ex does not work, but actively looking to, and I estimate probably will get a job in 3-6 months
• To avoid selling the main house, I decided to free some equity when remortgaging last year, and use that as a deposit for a second home
• I have an agreement with ex that the money I have to pass is the mortgage payments (i.e. I keep paying the mortgage myself and don't pass any more money) - I asked for this because the mortgage is still jointly to both of us and if ex did not pay I would be in trouble, and is exactly the same as ex would be entitled according to online divorce calculators (once ex gets a job and can take on mortgage, this will change, obviously)
• I have an offer for a property accepted now, and looking to progress the purchase
• I was aware I had to pay additional rate of SDLT on this property, but I have been made aware I might be able to claim that back afterwards (which would be a good sweetener).

What I am struggling to understand is the timings of the process (max 3 years? since I move). Hence, I am putting below an example (not real numbers but close enough to real situation).

• Let's assume new property is worth £200,000. Hence SDLT would be 3% additional, £6,000
• Once I buy that property, I would jointly own first house (FMH - let's call house A) and also own solely house B
• After I move to house B, I will sort out divorce. Most likely ex will get house A (assume to be worth £240,000, but ex will be entitled to more than 50% for being at home looking after kids while I worked - i understand this), and I will get house B (worth £200,000 as per above).
• I would them claim a rebate of the SDLT for house B

Am I understanding this right? Is this possible? 

Many thanks in advance 

For a reclaim of the 3% surcharge payable on house B to be possible, it is important that at the time of your purchase of it you and your spouse are separated in circumstances likely to be permanent (not cohabiting).  To trigger a right to a refund you would need to part with all of your interest to your ex within three years.

If you did things in a different order, you might not have to pay the extra 3% at all.  There is guidance here xxxxx about the effect of obtaining a "property adjustment order" in respect of house A before you complete the purchase os house B.

Note that the 3% surcharge might be increased in the 15 March 2023 Budget.

Thank you for your reply,

Ex has been already successfully claiming Universal Credit  for some months, and to be eligible has stated we have been separated since last October - is this evidence enough?

I will have a look at the guidance you sent, many thanks. I was aware we could maybe do things different to avoid paying the 3% surcharge, but the emotional toll of the separation / divorce is too much to add dealing with the divorce right now.

When you are both living under the same roof a higher degree of proof might be required that you are separated in circumstances likely to be permanent.

 It will help if the paper trail clearly evidences that you are buying house B for you alone to live in and she will stay in house A.