Does reclaiming stamp duty have a good chance of success?

NervyBuyer

I own the house (no mortgage) that I live in. I also own 25% of my mother's house which was left to me by my father 2.5 years ago (they were tenants in common). It's a 'lifetime trust' for her I believe. I am looking to buy another house to move into with cash I already have saved and sell the one I currently live in. There are 3 possible scenarios:

1. Buy new house, pay higher rate SDLT, immediately sell current house, reclaim SDLT surcharge on the grounds of replacing my main residence within 3 years.
2. Sell current house, ASAP afterwards buy new house at standard SDLT rate as I don't own any other property at that point.
3. Sell and buy at the same time, standard SDLT rate as I'm replacing my main residence.

3 is the straightforward one for SDLT but unattractive because of having to synchronise the sale and purchase when I don't need the funds from the sale, and buying is hard enough where I'm looking I need every advantage I can get (i.e. no chain).

Questions:

1. Does 1 stand a good chance of success, i.e. is it a formality, if the sale goes through in time?
2. Am I correct in my understanding of the situation in 2, i.e. my inherited share doesn't count as 'owning' for SDLT purposes? 

I find the higher rate conditions a bit puzzling, as I would have expected to be penalised simply for owning >1 property rather than avoid being penalised by replacing a main residence while still owning >1 property. Potentially there is a risk of paying higher rate SDLT in scenario 2 just because I no longer have a main residence I can replace.

Thanks!

user1977

It’s a formality.

bobster2

user1977 said:

It’s a formality.

Yes - if you're entitled to a rebate you just fill in an online form giving details of the transactions. And it get paid. Simple

EssexHebridean

It takes a few weeks to come through, but as said above, it is essentially a formality. 

The only real risk is if something should happen to prevent you selling your current main residence  within 3 years… 

NervyBuyer

Thank you, that's very reassuring!

Keep_pedalling

If your father’s will gave your mother a life interest in that share then legal ownership is currently with an IPDI trust and you mother is the beneficial owner. you don’t actually inherit until your mother’s death, which avoids any issues with SDLT on any other purchase and CGT when it is eventually sold.

Bookworm105

Keep_pedalling said:

If your father’s will gave your mother a life interest in that share then legal ownership is currently with an IPDI trust and you mother is the beneficial owner. you don’t actually inherit until your mother’s death, which avoids any issues with SDLT on any other purchase and CGT when it is eventually sold.

if being the operative word 

Keep_pedalling

Bookworm105 said:

Keep_pedalling said:

If your father’s will gave your mother a life interest in that share then legal ownership is currently with an IPDI trust and you mother is the beneficial owner. you don’t actually inherit until your mother’s death, which avoids any issues with SDLT on any other purchase and CGT when it is eventually sold.

if being the operative word 

It would be the normal way of doing it, ant the OP does mention a life time interest in the opening post so it seems highly likely.

SDLT_Geek

NervyBuyer said:

I own the house (no mortgage) that I live in. I also own 25% of my mother's house which was left to me by my father 2.5 years ago (they were tenants in common). It's a 'lifetime trust' for her I believe. I am looking to buy another house to move into with cash I already have saved and sell the one I currently live in. There are 3 possible scenarios:

1. Buy new house, pay higher rate SDLT, immediately sell current house, reclaim SDLT surcharge on the grounds of replacing my main residence within 3 years.
The surcharge to fund is now 5%, as I expect you know.
2. Sell current house, ASAP afterwards buy new house at standard SDLT rate as I don't own any other property at that point.
3. Sell and buy at the same time, standard SDLT rate as I'm replacing my main residence.

3 is the straightforward one for SDLT but unattractive because of having to synchronise the sale and purchase when I don't need the funds from the sale, and buying is hard enough where I'm looking I need every advantage I can get (i.e. no chain).

Questions:

1. Does 1 stand a good chance of success, i.e. is it a formality, if the sale goes through in time? Yes, as others have said, a formality.  HMRC have online forms you can use.
2. Am I correct in my understanding of the situation in 2, i.e. my inherited share doesn't count as 'owning' for SDLT purposes? It does not matter for surcharge purposes whether or not you own other property at that point, you should meet all of the conditions of the "replacement exception" as set out in HMRC's manual at SDLTM09800.

I find the higher rate conditions a bit puzzling, as I would have expected to be penalised simply for owning >1 property rather than avoid being penalised by replacing a main residence while still owning >1 property.
So long as you meet the conditions for replacing your main residence (which requires a sale  / disposal of a previous main residence) then it would not matter if you owned ten other properties.

Potentially there is a risk of paying higher rate SDLT in scenario 2 just because I no longer have a main residence I can replace.
You have three years following the sale of your previous home within which you can buy a replacement home and still meet the conditions for the replacement exception, as set out in SDLTM09800.

Thanks!

Notes in bold above.

NervyBuyer

Thank you all, that's extremely helpful (yes, aware of the new 5%).