Stamp Duty question re "Main Residency"

juve1984

We’ve been living in a rental for the past few years due to the one bedroom apartment I’ve owned since 2011 (& used to live in) being impractical for 2 adults & 2 kids.

My 2024 plan was to sell the apartment (something I tried unsuccessfully in 2022), buy a house & leave the rental for that. 

However, the apartment did not quite sell in time but we were lucky enough to still buy a house & move out of the rental. This was a week ago & the apartment is now days from completion.

Due to us effectively owning 2 properties at the time of the house purchase I’m having to pay incremental stamp duty. My understanding is that when the apartment sells, I can claim back the extra stamp duty as it’s within 3 years.

My concern is that the apartment I’m about to sell was not our “primary residence” (the terminology set out by HMRC) at the time we bought the house (or in the previous 3 years), our rental was our primary residence for the reason I outlined at the start.

Common sense would suggest that I should not be penalised like someone who has a portfolio of properties just because my apartment sale was 2 weeks later than my house purchase, despite me making every effort to avoid this.

My tax advisor can't seem to find a clear answer so I thought I'd ask here. Any clarity would be appreciated as it’s a significant amount of money.

Thanks

leonj

I had to pay higher rate stamp duty because i own a share of dads house that i can't even so anything with, there was no way out of that, I read almost everything on the gov website about it. You can apply for a refund.l I would ignore everything that comes up on an internet search unless it is direct from the government webiste, most of it is gibberish.
https://www.gov.uk/guidance/apply-for-a-refund-of-the-higher-rates-of-stamp-duty-land-tax

_Penny_Dreadful

juve1984 said:

We’ve been living in a rental for the past few years due to the one bedroom apartment I’ve owned since 2011 (& used to live in) being impractical for 2 adults & 2 kids.

My 2024 plan was to sell the apartment (something I tried unsuccessfully in 2022), buy a house & leave the rental for that. 

However, the apartment did not quite sell in time but we were lucky enough to still buy a house & move out of the rental. This was a week ago & the apartment is now days from completion.

Due to us effectively owning 2 properties at the time of the house purchase I’m having to pay incremental stamp duty. My understanding is that when the apartment sells, I can claim back the extra stamp duty as it’s within 3 years.

My concern is that the apartment I’m about to sell was not our “primary residence” (the terminology set out by HMRC) at the time we bought the house (or in the previous 3 years), our rental was our primary residence for the reason I outlined at the start.

Common sense would suggest that I should not be penalised like someone who has a portfolio of properties just because my apartment sale was 2 weeks later than my house purchase, despite me making every effort to avoid this.

My tax advisor can't seem to find a clear answer so I thought I'd ask here. Any clarity would be appreciated as it’s a significant amount of money.

Thanks

See condition D in the SDLT manual. To count as a disposal of your main residence you must have occupied the property as your only or main residence within 3 years of purchasing your new main residence. You say you haven’t lived in the flat for over 3 years so you do not meet the condition of replacing your main residence therefore not only is the higher rate of SDLT due but you are not entitled to a refund once you eventually complete the sale of the apartment. 

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09800

HMRC does have provision for extending the 3 year rule due to exceptional circumstances that could not reasonably have been foreseen when the previous main residence is sold as soon as reasonably possible after ceasing to be so prevented. After completing the sale of the flat you would need to contact HMRC setting out:

• what the exceptional circumstances were,
• how and why these exceptional circumstances prevented you from disposing of you previous main residence,
• why the circumstances were not foreseeable and
• evidence that as soon as you reasonably could, after the exceptional circumstances ended, you sold their previous main dwelling.

HMRC would then make a determination as to whether it is reasonable to refund you the additional SDLT due. 

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09807

I would expect a tax adviser to know the above. 

SDLT_Geek

_Penny_Dreadful said:

juve1984 said:

We’ve been living in a rental for the past few years due to the one bedroom apartment I’ve owned since 2011 (& used to live in) being impractical for 2 adults & 2 kids.

My 2024 plan was to sell the apartment (something I tried unsuccessfully in 2022), buy a house & leave the rental for that. 

However, the apartment did not quite sell in time but we were lucky enough to still buy a house & move out of the rental. This was a week ago & the apartment is now days from completion.

Due to us effectively owning 2 properties at the time of the house purchase I’m having to pay incremental stamp duty. My understanding is that when the apartment sells, I can claim back the extra stamp duty as it’s within 3 years.

My concern is that the apartment I’m about to sell was not our “primary residence” (the terminology set out by HMRC) at the time we bought the house (or in the previous 3 years), our rental was our primary residence for the reason I outlined at the start.

Common sense would suggest that I should not be penalised like someone who has a portfolio of properties just because my apartment sale was 2 weeks later than my house purchase, despite me making every effort to avoid this.

My tax advisor can't seem to find a clear answer so I thought I'd ask here. Any clarity would be appreciated as it’s a significant amount of money.

Thanks

See condition D in the SDLT manual. To count as a disposal of your main residence you must have occupied the property as your only or main residence within 3 years of purchasing your new main residence. You say you haven’t lived in the flat for over 3 years so you do not meet the condition of replacing your main residence therefore not only is the higher rate of SDLT due but you are not entitled to a refund once you eventually complete the sale of the apartment. 

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09800

HMRC does have provision for extending the 3 year rule due to exceptional circumstances that could not reasonably have been foreseen when the previous main residence is sold as soon as reasonably possible after ceasing to be so prevented. After completing the sale of the flat you would need to contact HMRC setting out:

• what the exceptional circumstances were,
• how and why these exceptional circumstances prevented you from disposing of you previous main residence,
• why the circumstances were not foreseeable and
• evidence that as soon as you reasonably could, after the exceptional circumstances ended, you sold their previous main dwelling.

HMRC would then make a determination as to whether it is reasonable to refund you the additional SDLT due. 

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09807

I would expect a tax adviser to know the above. 

A good answer.

Yes, for the "replacement exception" to work OP would need to have lived in the flat as their only or main residence within the three years leading up to the purchase of the house.

The extension for exceptional circumstances is sparingly applied.

housebuyer143

Damn! You should have delayed the house purchase until the sale of the flat was completed as now your refund is in the hands of HMRC and trying to prove all the above. Good luck to you. 
The system unfortunately punishes people in unforseen ways.

Bookworm105

juve1984 said:

Common sense would suggest that I should not be penalised like someone who has a portfolio of properties just because my apartment sale was 2 weeks later than my house purchase, despite me making every effort to avoid this.

My tax advisor can't seem to find a clear answer so I thought I'd ask here. Any clarity would be appreciated as it’s a significant amount of money.

Thanks

your apartment was not your main residence, you are not entitled to a refund.

has it been sitting empty since 2022 or did you in fact let it?

saajan_12

juve1984 said:

We’ve been living in a rental for the past few years due to the one bedroom apartment I’ve owned since 2011 (& used to live in) being impractical for 2 adults & 2 kids.

...

My concern is that the apartment I’m about to sell was not our “primary residence” (the terminology set out by HMRC) at the time we bought the house (or in the previous 3 years), our rental was our primary residence for the reason I outlined at the start.

Common sense would suggest that I should not be penalised like someone who has a portfolio of properties just because my apartment sale was 2 weeks later than my house purchase, despite me making every effort to avoid this.

So its now an investment property or second home, where you haven't lived for 3 years, which is precisely where HMRC draw the line. People often think they shouldn't be the target of higher taxation, but this is easily within what HMRC are trying to target with the additional 3% stamp duty - not just increasing but also replacing investment properties. 

juve1984 said:

My tax advisor can't seem to find a clear answer so I thought I'd ask here. Any clarity would be appreciated as it’s a significant amount of money.

Concerming, as this is pretty clear cut and effectively one of the easy examples.. are they not a property specialist? If they are, then maybe time for a new tax advisor? 

juve1984 said:

My 2024 plan was to sell the apartment (something I tried unsuccessfully in 2022), buy a house & leave the rental for that. 

However, the apartment did not quite sell in time but we were lucky enough to still buy a house & move out of the rental. This was a week ago & the apartment is now days from completion.

So what has happened since you moved out in / before 2022? Has it been one drawn out sale, or have you taken it off the market and renovated or rented it out in that time? That's on the extreme side, so likely there's been a choice to not get rid of it asap wihtin that time. 

TheJP

saajan_12 said:

juve1984 said:

We’ve been living in a rental for the past few years due to the one bedroom apartment I’ve owned since 2011 (& used to live in) being impractical for 2 adults & 2 kids.

...

My concern is that the apartment I’m about to sell was not our “primary residence” (the terminology set out by HMRC) at the time we bought the house (or in the previous 3 years), our rental was our primary residence for the reason I outlined at the start.

Common sense would suggest that I should not be penalised like someone who has a portfolio of properties just because my apartment sale was 2 weeks later than my house purchase, despite me making every effort to avoid this.

So its now an investment property or second home, where you haven't lived for 3 years, which is precisely where HMRC draw the line. People often think they shouldn't be the target of higher taxation, but this is easily within what HMRC are trying to target with the additional 3% stamp duty - not just increasing but also replacing investment properties. 

juve1984 said:

My tax advisor can't seem to find a clear answer so I thought I'd ask here. Any clarity would be appreciated as it’s a significant amount of money.

Concerming, as this is pretty clear cut and effectively one of the easy examples.. are they not a property specialist? If they are, then maybe time for a new tax advisor? 

juve1984 said:

My 2024 plan was to sell the apartment (something I tried unsuccessfully in 2022), buy a house & leave the rental for that. 

However, the apartment did not quite sell in time but we were lucky enough to still buy a house & move out of the rental. This was a week ago & the apartment is now days from completion.

So what has happened since you moved out in / before 2022? Has it been one drawn out sale, or have you taken it off the market and renovated or rented it out in that time? That's on the extreme side, so likely there's been a choice to not get rid of it asap wihtin that time. 

Agree, looks like the OP had plenty time to sell but didn't.