Higher rate stamp duty for separating couples

datliz

My husband and I are separating, selling our current house which is in joint names and each buying our own house in our own names. The sale and purchases will be on the same day as we need to release the equity to fund our own onward purchases. The separation hasn’t legally gone though yet. Will we be liable to pay the higher rate of stamp duty? We’ll each only have 1 home but as we’ll still technically be married when the sale goes through will this have an impact? 

silvercar

If you are permanently separating, you both can buy independently without incurring higher rate SDLT.

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09797

datliz

Thank you. Would you need to supply proof that you are permanently separating or will they just take your word for it? I wasn’t sure if we’d need to show any formal documents

SDLT_Geek

I agree with @silvercar so long as you are each buying in England so that the relevant stamp duty is stamp duty land tax.

AskAsk

we did this recently and we each would have needed to pay extra stamp duty as we would still be considered to be connected.  we had to get a separation agreement drawn up by the solicitors and signed together with divorce court proceedings before the solicitor would accept the non payment of the extra stamp duty.

i bought my ex out of our marital home and he bought a new house.  with all the legal evidence in place, the solicitors still couldn't get the stamp duty submission right!  it is a complete nuisance as the law isn't clear for separating couples like it should be.

SDLT_Geek

datliz said:

Thank you. Would you need to supply proof that you are permanently separating or will they just take your word for it? I wasn’t sure if we’d need to show any formal documents

SDLT is self-assessed and no evidence needs to go in to HMRC with the two returns.  But you should make sure that you have the evidence in case it is ever requested by HMRC.

The fact that you are each buying your own house to live in is fairly strong evidence in itself.  Other steps which have been taken towards the separation will be useful too.  The "hindsight" evidence that you do later carry on with the full separation would be compelling (but a later reconciliation could correspondingly cast doubt on things).

Individual solicitors vary as to what they want to see.  It sounds as if @AskAsk was put the mill on this!  Other firms would be more relaxed, unless it looked like a "put up job".

AskAsk

SDLT_Geek said:

datliz said:

Thank you. Would you need to supply proof that you are permanently separating or will they just take your word for it? I wasn’t sure if we’d need to show any formal documents

SDLT is self-assessed and no evidence needs to go in to HMRC with the two returns.  But you should make sure that you have the evidence in case it is ever requested by HMRC.

The fact that you are each buying your own house to live in is fairly strong evidence in itself.  Other steps which have been taken towards the separation will be useful too.  The "hindsight" evidence that you do later carry on with the full separation would be compelling (but a later reconciliation could correspondingly cast doubt on things).

Individual solicitors vary as to what they want to see.  It sounds as if @AskAsk was put the mill on this!  Other firms would be more relaxed, unless it looked like a "put up job".

the solicitors worry that you are pretending to separate to avoid capital gains and extra stamp duty.  they have to satisfy themselves that there is no tax evasion before they will agree to submit the stamp duty form and the land registry form.

when i asked divorce lawyers, they say that as far as they understand, you have to pay the extra stamp duty but that you can claim it back if your divorce completes within 3 years.  i even called the stamp duty helpline and the advisor checked with his manager and said that extra stamp duty would be needed to be paid but that it can be claimed back after the divorce is complete, if it is done within 3 years.

everyone seems to have their own understanding of how the law works on this, even HMRC themselves!  it is really a complete mess in my experience.

SDLT_Geek

AskAsk said:

SDLT_Geek said:

datliz said:

Thank you. Would you need to supply proof that you are permanently separating or will they just take your word for it? I wasn’t sure if we’d need to show any formal documents

SDLT is self-assessed and no evidence needs to go in to HMRC with the two returns.  But you should make sure that you have the evidence in case it is ever requested by HMRC.

The fact that you are each buying your own house to live in is fairly strong evidence in itself.  Other steps which have been taken towards the separation will be useful too.  The "hindsight" evidence that you do later carry on with the full separation would be compelling (but a later reconciliation could correspondingly cast doubt on things).

Individual solicitors vary as to what they want to see.  It sounds as if @AskAsk was put the mill on this!  Other firms would be more relaxed, unless it looked like a "put up job".

the solicitors worry that you are pretending to separate to avoid capital gains and extra stamp duty.  they have to satisfy themselves that there is no tax evasion before they will agree to submit the stamp duty form and the land registry form.
That is right, solicitors should not act if they suspect tax evasion is going on.

when i asked divorce lawyers, they say that as far as they understand, you have to pay the extra stamp duty but that you can claim it back if your divorce completes within 3 years.
That is not right, they were confused!
  i even called the stamp duty helpline and the advisor checked with his manager and said that extra stamp duty would be needed to be paid but that it can be claimed back after the divorce is complete, if it is done within 3 years.
What a sorry state it is when HMRC cannot get it right.

everyone seems to have their own understanding of how the law works on this, even HMRC themselves!  it is really a complete mess in my experience.

See notes above.  I agree, what a complete mess!  This report of today suggests HMRC has deliberately allowed its phone service to deteriorate: https://committees.parliament.uk/committee/127/public-accounts-committee/news/204809/hmrc-accused-of-deliberately-poor-service-and-damage-to-public-confidence-in-tax-system/

AskAsk

SDLT_Geek said:

AskAsk said:

SDLT_Geek said:

datliz said:

Thank you. Would you need to supply proof that you are permanently separating or will they just take your word for it? I wasn’t sure if we’d need to show any formal documents

SDLT is self-assessed and no evidence needs to go in to HMRC with the two returns.  But you should make sure that you have the evidence in case it is ever requested by HMRC.

The fact that you are each buying your own house to live in is fairly strong evidence in itself.  Other steps which have been taken towards the separation will be useful too.  The "hindsight" evidence that you do later carry on with the full separation would be compelling (but a later reconciliation could correspondingly cast doubt on things).

Individual solicitors vary as to what they want to see.  It sounds as if @AskAsk was put the mill on this!  Other firms would be more relaxed, unless it looked like a "put up job".

the solicitors worry that you are pretending to separate to avoid capital gains and extra stamp duty.  they have to satisfy themselves that there is no tax evasion before they will agree to submit the stamp duty form and the land registry form.
That is right, solicitors should not act if they suspect tax evasion is going on.

when i asked divorce lawyers, they say that as far as they understand, you have to pay the extra stamp duty but that you can claim it back if your divorce completes within 3 years.
That is not right, they were confused!
  i even called the stamp duty helpline and the advisor checked with his manager and said that extra stamp duty would be needed to be paid but that it can be claimed back after the divorce is complete, if it is done within 3 years.
What a sorry state it is when HMRC cannot get it right.

everyone seems to have their own understanding of how the law works on this, even HMRC themselves!  it is really a complete mess in my experience.

See notes above.  I agree, what a complete mess!  This report of today suggests HMRC has deliberately allowed its phone service to deteriorate: https://committees.parliament.uk/committee/127/public-accounts-committee/news/204809/hmrc-accused-of-deliberately-poor-service-and-damage-to-public-confidence-in-tax-system/

my ex struggled to find a solicitor that would deal with the purchase of the new house as no one wanted to get involved with a separating couple as the conveyancers don't want to deal with complicated cases and prefer to work with standard cases.  we were lucky to have found someone who happened to have experience in buying a property where someone was separated, otherwise it could have been even worse.

and i found even more problems finding a solicitor that would deal with the equity transfer as no one understood about the tax implications and didn't want to get involved.  i ended paying a lot of money to a solicitor who would agree to do it but i found most conveyancers weren't interested.

datliz

AskAsk said:

SDLT_Geek said:

datliz said:

Thank you. Would you need to supply proof that you are permanently separating or will they just take your word for it? I wasn’t sure if we’d need to show any formal documents

SDLT is self-assessed and no evidence needs to go in to HMRC with the two returns.  But you should make sure that you have the evidence in case it is ever requested by HMRC.

The fact that you are each buying your own house to live in is fairly strong evidence in itself.  Other steps which have been taken towards the separation will be useful too.  The "hindsight" evidence that you do later carry on with the full separation would be compelling (but a later reconciliation could correspondingly cast doubt on things).

Individual solicitors vary as to what they want to see.  It sounds as if @AskAsk was put the mill on this!  Other firms would be more relaxed, unless it looked like a "put up job".

the solicitors worry that you are pretending to separate to avoid capital gains and extra stamp duty.  they have to satisfy themselves that there is no tax evasion before they will agree to submit the stamp duty form and the land registry form.

when i asked divorce lawyers, they say that as far as they understand, you have to pay the extra stamp duty but that you can claim it back if your divorce completes within 3 years.  i even called the stamp duty helpline and the advisor checked with his manager and said that extra stamp duty would be needed to be paid but that it can be claimed back after the divorce is complete, if it is done within 3 years.

everyone seems to have their own understanding of how the law works on this, even HMRC themselves!  it is really a complete mess in my experience.

Yep. I called up HMRC yesterday and spoke to someone there (a tax advisor) and even he didn’t know for sure! What a mess is correct! How are we supposed to have faith in an organisation which clearly doesn’t understand their own policies, especially when you think how much money they make off people!!

AskAsk

datliz said:

AskAsk said:

SDLT_Geek said:

datliz said:

Thank you. Would you need to supply proof that you are permanently separating or will they just take your word for it? I wasn’t sure if we’d need to show any formal documents

SDLT is self-assessed and no evidence needs to go in to HMRC with the two returns.  But you should make sure that you have the evidence in case it is ever requested by HMRC.

The fact that you are each buying your own house to live in is fairly strong evidence in itself.  Other steps which have been taken towards the separation will be useful too.  The "hindsight" evidence that you do later carry on with the full separation would be compelling (but a later reconciliation could correspondingly cast doubt on things).

Individual solicitors vary as to what they want to see.  It sounds as if @AskAsk was put the mill on this!  Other firms would be more relaxed, unless it looked like a "put up job".

the solicitors worry that you are pretending to separate to avoid capital gains and extra stamp duty.  they have to satisfy themselves that there is no tax evasion before they will agree to submit the stamp duty form and the land registry form.

when i asked divorce lawyers, they say that as far as they understand, you have to pay the extra stamp duty but that you can claim it back if your divorce completes within 3 years.  i even called the stamp duty helpline and the advisor checked with his manager and said that extra stamp duty would be needed to be paid but that it can be claimed back after the divorce is complete, if it is done within 3 years.

everyone seems to have their own understanding of how the law works on this, even HMRC themselves!  it is really a complete mess in my experience.

Yep. I called up HMRC yesterday and spoke to someone there (a tax advisor) and even he didn’t know for sure! What a mess is correct! How are we supposed to have faith in an organisation which clearly doesn’t understand their own policies, especially when you think how much money they make off people!!

exactly.  they are the ones charging the stamp duty so you would think that they understand what they are charging and when it applies but doesn't seem to be the case!  if they don't know, who would?

i found the separation to be very stressful because of the laws on tax.  It seems that people are used to working with court orders on divorce so they rely on the court order.  but if you do anything financial without the court order, you will struggle to find a solicitor that will agree to act for you as they worry that you are tax evading if there is no court order for them to follow.