Stamp duty rate when I own 50% share in an inherited property

Ant5

Hi my sister and I have inherited our dad's property, 50% each (worth over £40k)

I own another property that I am selling. I was planning to sell my property and move in the inherited property before buying somewhere new.

My understanding is that if I was just selling my main residence and buying a new property, that would be my main residence and stamp duty on the purchase would be at the normal rate.

My question is that if I move into the inherited property after selling mine, the inherited property then becomes my main residence. If I then buy without selling the inherited property am I caught by higher rate stamp duty?

My initial thought was yes, but then I saw this...

*gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09795

(sorry I can't post links yet)

Which states that if I own 50% or less I don't have to pay the higher rate as long as inherited property is sold within 3 years. But the example doesn't deal with the whether the 'brother' is living in the inherited property as his main residence.

Many thanks

Ant5

Here is

SDLTM09795 - SDLT - higher rates for additional dwellings: Condition C – interests inherited in the last three years - Para 16 Sch 4ZA FA2003

Following the death of an individual, the beneficiaries of their estate may become entitled to a major interest in a dwelling. The ways in which this might happen could be:

• where the personal representative transfers or appropriates the interest in satisfaction of a bequest of that particular dwelling,
• where the personal representative transfers or appropriates the interest in satisfaction of a pecuniary gift or an interest in residue, or
• under the law in another country, the deceased’s interest passes automatically to the beneficiary as an heir to the estate.

Where a person becomes entitled to such an interest in the three years before a chargeable transaction, the interest can be ignored for the purposes of determining whether the transaction is a higher rates transaction [Para 16(2)] provided that:

• the beneficiary became a joint owner of the interest by inheritance [Para 16(1)],
• the beneficiary and any spouse or civil partner’s combined interest has not exceeded half of the major interest in the three years before the effective date of the chargeable transaction [Para 16(4)].

Where an interest is held as a tenant in common, the declared interest held by the owner and their spouse or civil partner must be 50 per cent of the whole interest or less. Where an interest is held as joint tenants the owner and any spouse or civil partner who is a joint tenant must make up either strictly half, or a minority of the joint tenants.

If such an interest was inherited more than three years before the chargeable transaction, then it will count as an interest in another dwelling at the end of the day of the effective date of the chargeable transaction.

The date of the inheritance for these purposes is the date that the individual becomes entitled to the interest. An interest in an un-administered estate is not a major interest in land and so usually the date the individual acquired the interest is the date the interest is transferred or appropriated to them. Although, see Capital Gains Manual at CG30700 onwards for the situation where the residue of an estate has been ascertained and the personal representative holds the residue of the estate for the beneficiary absolutely.

In jurisdictions where property devolves directly on heirs, the date of inheritance will be the date of death.

Example

Two brothers (Mr A & Mr J) recently inherited their parents’ house, each owning a 50% share. Mr A owns no other property at present but is in the process of purchasing a flat, which will be his main residence.

The higher rates will not apply to the purchase of the new property by Mr A on account of the inherited interest, provided that this is purchased within 3 years of inheriting the property, and during that 3 year period the interest held by Mr A in the inherited property, together with any interest held by his spouse or civil partner, does not exceed 50%.

Keep_pedalling

Is your sister OK with this? You moving in is going to delay her getting her her inheritance for an indefinite period, not something I would be happy with in her shoes.

SDLT_Geek

Ant5 said:

Hi my sister and I have inherited our dad's property, 50% each (worth over £40k)

I own another property that I am selling. I was planning to sell my property and move in the inherited property before buying somewhere new.

My understanding is that if I was just selling my main residence and buying a new property, that would be my main residence and stamp duty on the purchase would be at the normal rate.

My question is that if I move into the inherited property after selling mine, the inherited property then becomes my main residence. If I then buy without selling the inherited property am I caught by higher rate stamp duty?

My initial thought was yes, but then I saw this...

*gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09795

(sorry I can't post links yet)

Which states that if I own 50% or less I don't have to pay the higher rate as long as inherited property is sold within 3 years. But the example doesn't deal with the whether the 'brother' is living in the inherited property as his main residence.

Many thanks

I have put a bit in italics and bold.  You do not summarize SDLT09795 well there.  What SDLTM09795 means is that you can disregard an inherited share of up to 50% for a purchase completing within three years of you acquiring the inherited interest. 

There is no requirement of a sale of the inherited property within any period.

Ant5

SDLT_Geek said:

Ant5 said:

Hi my sister and I have inherited our dad's property, 50% each (worth over £40k)

I own another property that I am selling. I was planning to sell my property and move in the inherited property before buying somewhere new.

My understanding is that if I was just selling my main residence and buying a new property, that would be my main residence and stamp duty on the purchase would be at the normal rate.

My question is that if I move into the inherited property after selling mine, the inherited property then becomes my main residence. If I then buy without selling the inherited property am I caught by higher rate stamp duty?

My initial thought was yes, but then I saw this...

*gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09795

(sorry I can't post links yet)

Which states that if I own 50% or less I don't have to pay the higher rate as long as inherited property is sold within 3 years. But the example doesn't deal with the whether the 'brother' is living in the inherited property as his main residence.

Many thanks

I have put a bit in italics and bold.  You do not summarize SDLT09795 well there.  What SDLTM09795 means is that you can disregard an inherited share of up to 50% for a purchase completing within three years of you acquiring the inherited interest. 

There is no requirement of a sale of the inherited property within any period.

Thanks, yes I now understand where I got that wrong.

So whether I'm living in the inherited property or not when I purchase my new property is irrelevant?

RAS

Yep. But you need to purchase the other property within 3 years of acquiring the inherited interest.