Higher rate stamp duty eligibility

tippytappytoo

Hi all,

I'm hoping someone with a good understanding of the higher-rate SDLT rules can sanity-check our situation.

We're married and are about to sell our current home and buy a new one.

Our circumstances are:

• My wife owns our current main residence outright in her name only.
• We have both genuinely lived there as our main residence.
• I separately own a flat in my name only, worth around £150k, which is rented out.
• Neither of us owns any other property.
• We're buying a new property for £995k, which will become our joint main residence.
• The current house and new property are expected to complete on the same day.
• My wife will sell the current house and I will retain the rented flat.

Our solicitor originally told us that we didn't have to pay the higher SDLT rate. Yesterday they changed their mind and now say we do because I own the flat. Another solicitor we spoke to previously thought the higher rates wouldn't apply.

I've looked through HMRC's SDLT manual and have found SDLTM09730 / SDLTM09810 Example 1, which seems remarkably similar to our situation.

The HMRC example says:

Mr and Mrs S are married and each own a residential property. They both live in the property owned by Mrs S as their main residence, while Mr S's property is rented out. Mrs S sells her property and they jointly purchase a new property as their new main residence. Mr S retains his rented property.

HMRC then considers Conditions A-D and says:

"The higher rates will not apply to the joint purchase by Mr and Mrs S of a new main residence."

The explanation seems to be:

Condition C:

• Mr S owns another dwelling, so he meets Condition C.
• Mrs S doesn't own another dwelling at the end of the day because she has sold her existing home, so she fails Condition C (so long as both transactions complete on the same day).

Condition D:

• HMRC says the replacement test is met because the previous main residence belonged to his wife and they had both lived there as their main residence.
• Therefore Mr S fails Condition D.

As all four conditions A-D need to be met for the higher rates to apply, the higher rates don't apply.

This seems almost identical to our circumstances.

Am I interpreting HMRC Example 1 correctly?

Or is there something about our situation that means the HMRC example doesn't apply?

The SDLT difference is substantial: roughly £43,250 at the standard rates versus £93,000 at the higher rates, so we're obviously keen to get this right!

I'd be very grateful for anyone who can either confirm the interpretation or point out where I'm going wrong.

GrumpyDil

That mirrors my understanding as well. If you sell your main residence and purchase a new property, even if you own another rental property in the background there is no liability to the higher rate stamp duty.

Note that as a married couple you can only have one main residence for both of you.

_Penny_Dreadful

https://forums.moneysavingexpert.com/discussion/6679506/higher-rate-stamp-duty-eligibility

You are indeed interpreting the rules correctly. The higher rate of SDLT will not apply to your circumstances.

kingstreet

You currently own two.

You will in future own two.

Standard SDLT applies.

SDLT_Geek

https://forums.moneysavingexpert.com/discussion/comment/82100081#Comment_82100081

I agree.

The other way to approach this is to read carefully the conditions for the replacement rules in SDLTM09800 https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09800 thinking of you as a buyer, focussing on the words "or the purchaser's spouse or civil partner at the time" within condition 2.

saajan_12

You're right, as a married couple you're effectively treated as one unit, who currently owns 2 properties. One of those is the main residence, which is being sold to buy a new main residence for the unit. So no higher rate SDLT due.

sherlock228

https://forums.moneysavingexpert.com/discussion/comment/82100517#Comment_82100517

is a perfect summary of why higher rate does NOT apply

poseidon1

However, does make one concerned about the competency of the so called professional solicitor/ conveyancer who has been advising differently.

They handle these matters regularly as part of their business so who else are they wrongly advising to the client's detriment?

tippytappytoo

https://forums.moneysavingexpert.com/discussion/comment/82100502#Comment_82100502

Thank you SDLT_Geek for that advice. I'm going to go through that and the other higher rate documents to be clear about definitions and conditions. Then I'll probably contact a tax advisor as well just to be sure.

And thanks to everyone else who's commented. You've all helped!