Stamp Duty. Sell before buy or vice versa ?

DesWalker

Hi All,

Suppose a U.K. resident (and national) owns a house in the UK as their primary residence and also a holiday home abroad where they spend 3 months per year. Also suppose this person wishes to move house in the U.K and to use this new house as their primary residence.

It is my understanding that if this person bought the new UK house before selling the old UK house then they would be liable for the 3% stamp duty surcharge on the purchase but that they would be able to claim this back were their old U.K. property to sell within 3 years. In such a scenario owning the foreign property is irrelevant. Is this correct ?

However if the same person were to sell their old UK property first and then move into rented accommodation in the U.K. for six months whilst they searched for a new property then when they came to buy the new property they would also be liable for the 3% surcharge due to owning the property abroad but would no longer have any prospect of claiming this 3% back as the old UK property is already sold. Is my understanding correct ?

If my understanding of the situation is correct then this does not seem very fair at all and I find it hard to imagine the law was intended to work like this. There must have been many such situations as the second scenario up and down the U.K. in recent years with the buyers feeling rather aggrieved....

Any information or thoughts on this clear anomaly very gratefully received.

Des

DE_612183

In the second scenario surely you are purchaisng a property which will be your main residence, so you won't pay the higher rate and therefore will have no need to claim back?

user1977

DesWalker said:

If my understanding of the situation is correct then this does not seem very fair at all

I am delighted to inform you that you are incorrect, and a 6 month gap is still treated as "replacing" your main residence.

DesWalker

Many thanks for the reply. I am no expert but my understanding of the law is that owning a property abroad even if it is not and has never been one’s primary residence is sufficient to trigger the surcharge. If anyone with more knowledge than me is able to correct any misunderstanding then I would be very grateful.

DesWalker

Thanks user1977. Is there a time limit on this replacement of main residence ? What if someone has been resident but renting in the U.K. for ten years between purchases ? 

km1500

https://www.blakemorgan.co.uk/stamp-duty-land-tax-3-surcharge-replacement-of-only-or-main-residence-and-the-three-year-rules/

SDLT_Geek

DesWalker said:

Hi All,

Suppose a U.K. resident (and national) owns a house in the UK as their primary residence and also a holiday home abroad where they spend 3 months per year. Also suppose this person wishes to move house in the U.K and to use this new house as their primary residence.

It is my understanding that if this person bought the new UK house before selling the old UK house then they would be liable for the 3% stamp duty surcharge on the purchase but that they would be able to claim this back were their old U.K. property to sell within 3 years. In such a scenario owning the foreign property is irrelevant. Is this correct ?
Yes

However if the same person were to sell their old UK property first and then move into rented accommodation in the U.K. for six months whilst they searched for a new property then when they came to buy the new property they would also be liable for the 3% surcharge due to owning the property abroad but would no longer have any prospect of claiming this 3% back as the old UK property is already sold. Is my understanding correct ?
No

If my understanding of the situation is correct then this does not seem very fair at all and I find it hard to imagine the law was intended to work like this. There must have been many such situations as the second scenario up and down the U.K. in recent years with the buyers feeling rather aggrieved....

Any information or thoughts on this clear anomaly very gratefully received.

Des

See above.  There is a reasonable explanation of the conditions for the "replacement exception" here: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09800

For your first scenario see the second set of four conditions.  For your second scenario, see the first set of five conditions.