Unusual SDLT situation

ForumNoobie

My query relates to whether the higher rate of SDLT should apply to our upcoming purchase of a property in the UK.

We are New Zealanders resident in the UK and British citizens.

In 2015, my husband and I sold our home in NZ and left NZ.

We have not returned to NZ since 2015.

We have rented the same house here in the UK since October 2016. We have had a series of AST agreements throughout that period. In October 2023, we shifted to a periodic tenancy.

This has been our only residence in the UK. It has been our primary (main) residence.

In June 2021, my mother-in-law gifted a flat she owned in NZ to my husband and his brother (50% each). I have no share in the property.

As neither he nor I have returned to NZ since 2015, it is easy to show that this property is not his (our) main residence. He does not intend to ever live there. It is a small flat but because of the inflated Auckland property market his 50% share is worth £250,000.

We are purchasing our first home in the UK and have been advised that the higher rate of SDLT will apply.

We obviously disposed of our old property more than 3 years ago but I was wondering if by any chance having rented and lived at the same address for more than 7 years between the sale of the old property and the purchase of a new one would be an exception to the disposal rule  and might be considered a replacement of main residence such that the higher rate of SDLT might not apply. 

I may be grasping at straws but I live in hope and with all fingers and toes crossed.

Schwarzwald

not that unusual.
but in nut shell.
you are married.
your husband owns (parts) of a property (overseas).
the 2% surcharge for a second home will apply.

others might correct if above is incorrect.

BarelySentientAI

Schwarzwald said:

not that unusual.
but in nut shell.
you are married.
your husband owns (parts) of a property (overseas).
the 2% surcharge for a second home will apply.

others might correct if above is incorrect.

With a high enough value to not be exempt.

silvercar

Calling @SDLT_Geek.

I suspect a way round may be to put the New Zealand property in the name of a company/ trust etc whatever is allowed over there. Then your husband won't own it, but the company/ Trust will own it.

A more long winded option would be to buy something cheap over here and sell it, thereby not increasing the number you of properties you own.

Or divorce him and buy in your own name and then remarry. It may be that you can separate rather than divorce. (Joke)

ForumNoobie

Schwarzwald said:

not that unusual.
but in nut shell.
you are married.
your husband owns (parts) of a property (overseas).
the 2% surcharge for a second home will apply.

others might correct if above is incorrect.

BarelySentientAI said:

Schwarzwald said:

not that unusual.
but in nut shell.
you are married.
your husband owns (parts) of a property (overseas).
the 2% surcharge for a second home will apply.

others might correct if above is incorrect.

With a high enough value to not be exempt.

Thank you both for responding so quickly to my enquiry. Due to Auckland's inflated property market, my husband's share in the property does exceed the exempted value --even the property is a small flat.

I was told my situation was unusual by our conveyancer.

I was prompted to post to the forum because I was looking at the HMRC SDLT manuals and there is reference to renting between purchasing the old and new residence and AST agreements as an exception to the disposal rule.

saajan_12

silvercar said:

Calling @SDLT_Geek.

I suspect a way round may be to put the New Zealand property in the name of a company/ trust etc whatever is allowed over there. Then your husband won't own it, but the company/ Trust will own it.

A more long winded option would be to buy something cheap over here and sell it, thereby not increasing the number you of properties you own.

Or divorce him and buy in your own name and then remarry. It may be that you can separate rather than divorce. (Joke)

Which would both be tax evasion (ie illegal, not just the legal tax avoidance).
- With no intention to actually make the cheap property your main residence, its false to declare it is to pay less tax. 
- To pretend to be separated in order to pay less tax when you are actually still together is also a false declaration. 

SDLT_Geek

ForumNoobie said:

My query relates to whether the higher rate of SDLT should apply to our upcoming purchase of a property in the UK.

We are New Zealanders resident in the UK and British citizens.

In 2015, my husband and I sold our home in NZ and left NZ.

We have not returned to NZ since 2015.

We have rented the same house here in the UK since October 2016. We have had a series of AST agreements throughout that period. In October 2023, we shifted to a periodic tenancy.

This has been our only residence in the UK. It has been our primary (main) residence.

In June 2021, my mother-in-law gifted a flat she owned in NZ to my husband and his brother (50% each). I have no share in the property.

As neither he nor I have returned to NZ since 2015, it is easy to show that this property is not his (our) main residence. He does not intend to ever live there. It is a small flat but because of the inflated Auckland property market his 50% share is worth £250,000.

We are purchasing our first home in the UK and have been advised that the higher rate of SDLT will apply.

We obviously disposed of our old property more than 3 years ago but I was wondering if by any chance having rented and lived at the same address for more than 7 years between the sale of the old property and the purchase of a new one would be an exception to the disposal rule  and might be considered a replacement of main residence such that the higher rate of SDLT might not apply. 

I may be grasping at straws but I live in hope and with all fingers and toes crossed.

The extra 3% SDLT will be due on the purchase if your husband still owns the 50% share in the NZ property when the purchase in England completes. 

As @silvercar suggests, it would be different if, by the time of the purchase, he does not own the share because it has been transferred to a limited company.  But there would be a lot to think about if that was proposed, including UK capital gains tax on the disposal.

The series of ASTs does not give you enough of an interest to dispose of to count as a "major interest" in the property you rent.  It would have been different if you held a lease granted for a term of over seven years.

silvercar

saajan_12 said:

silvercar said:

Calling @SDLT_Geek.

I suspect a way round may be to put the New Zealand property in the name of a company/ trust etc whatever is allowed over there. Then your husband won't own it, but the company/ Trust will own it.

A more long winded option would be to buy something cheap over here and sell it, thereby not increasing the number you of properties you own.

Or divorce him and buy in your own name and then remarry. It may be that you can separate rather than divorce. (Joke)

Which would both be tax evasion (ie illegal, not just the legal tax avoidance).
- With no intention to actually make the cheap property your main residence, its false to declare it is to pay less tax. 
- To pretend to be separated in order to pay less tax when you are actually still together is also a false declaration. 

Which is why I wrote (joke) at the end. 

Obviously, anyone out to defraud would just not have declared the New Zealand property.

Schwarzwald

ForumNoobie said:

Schwarzwald said:

not that unusual.
but in nut shell.
you are married.
your husband owns (parts) of a property (overseas).
the 2% surcharge for a second home will apply.

others might correct if above is incorrect.

BarelySentientAI said:

Schwarzwald said:

not that unusual.
but in nut shell.
you are married.
your husband owns (parts) of a property (overseas).
the 2% surcharge for a second home will apply.

others might correct if above is incorrect.

With a high enough value to not be exempt.

Due to Auckland's inflated property market, my husband's share in the property does exceed the exempted value --even the property is a small flat.

i have sympathy for that perspectiv, but it is irrelevant from a tax perspective.
Unless your husband owns it but the rent still goes to your MIL, aka usu-fruct?
I think that would change the situation.

But on the asset inflation point ... an inflated asset price usually correlates with inflated rental income, which in the UK should represent a nice side income, no?
if so, it is not all bad, or?
see the upside, you getting a nice rental income without having had to pay for the asset .... many peeps wld love such a generout MIL ....