Any stamp duty experts in here?

[marky911]

Hi, I’m trying to get a definitive answer on what we’ll have to pay when we move house next year.

I’m getting mixed info even between the professionals.

Quick summary of our situation -

Looking to move next year. Current home is our main residence. Wife and me on repayment mortgage.

We have a small semi detached in my home town which I bought in 2009.
It’s in my name only on a residential repayment mortgage with consent to let, proper insurance and tax paid etc. I’ve never lived in it though, although I’d planned to, hence the residential mortgage. Hasn’t been worth switching to a BTL mort as it’s on a good rate etc anyway.

Ideally we’d like to sell our house and move next spring, but keep the rental house as a pension pot.

I’ve been told by my mortgage advisor that we’ll have to pay “2nd property stamp duty” on the new house, which is an extra 3%.

So stamp duty will be £22k instead of £10k on a £400k house. I’m all for paying my dues but not for throwing money away.

I’ve since heard from an estate agent that as long as I’m swapping my main residence for another main residence then I’ll avoid the second property 3% extra because I’m simply swapping my main residence.

Just curious if anyone knows or who I should speak to for a definite answer. Solicitors or accountant, etc? I’ve even read of conveyancers trying to charge people the extra stamp when in fact it wasn’t due.

If we have to pay we may aswell sell the little rental house first as the tenancy is up in Feb. It would release a usable chunk of equity to help us buy a better house and would mean no more time spent every time it comes up for rent again.
On top of the equity released we’d save another £12k on stamp duty too.

The flip side is that the rental is not really much hassle and my tenants generally stay for a minimum of 2 years on 12 month tenancies. Also it’s getting paid off all the time and it’s a chunk of my pension pot I’d be writing off.

Anyway, definitive answers welcome. Thanks in advance.

[Groat]

marky911 said:

.... as long as I’m swapping my main residence for another main residence then I’ll avoid the second property 3% extra because I’m simply swapping my main residence.

...is the right answer although the current residence should be sold before the new residence is bought otherwise you'll have to pay the 3% while you own the two main residences and claim back the 3% once the old one is sold.

Edited by Groat on Tuesday 29th October 23:33

[marky911]

Evenin’ Groat,

That’s excellent thanks.
Yes I’d read about not owning them together for even a second otherwise I’d be charged.

That now makes a more compelling case for keeping the rental on. Which is the best option long term.

Much appreciated.

[Sarnie]

Simple test;

Will you own more property than you currently do, once you have sold and bought your new property?

If yes = additional SDLT due

If no = standard SDLT due

[Groat]

Sarnie said:

Simple test;

Will you own more property than you currently do, once you have sold and bought your new property?

If yes = additional SDLT due

If no = standard SDLT due

Test only works for main residences.

If he'd sold the let property and replaced it with another one he'd have had to pay the extra 3% (unless it fitted exemption criteria).

[Sarnie]

Groat said:

Test only works for main residences.

If he'd sold the let property and replaced it with another one he'd have had to pay the extra 3% (unless it fitted exemption criteria).

Maybe but that's not what he's asking............

[Groat]

marky911 said:

Evenin’ Groat,

That’s excellent thanks.
Yes I’d read about not owning them together for even a second otherwise I’d be charged.

That now makes a more compelling case for keeping the rental on. Which is the best option long term.

Much appreciated.

Funnily enough I got involved in a bit of an entanglement on a similar issue here in Scotland.

Me and the wife lived for many years in a house whose title was in my name only which we sold and moved into rented premises. She decided she wanted to buy a flat for us to live in in her name only, but she owns let property as well.

Very interesting debate ensued as to whether the dwelling we had lived in for many years was or was not, in law, her main principal residence. Quite surprising how confusing law (especially un-tried law) can sometimes become. As evidenced not least by contradictory opinions given by different "experts" when asked the same question.

Edited by Groat on Wednesday 30th October 01:17

[marky911]

Hi Groat,

Yes it’s as clear as mud sometimes and by innocently doing something a different way, you can end up limiting your options further down the line. The fact the “experts” also give you mixed messages simply adds to the confusion.

We are looking to keep the rental on now as I know I’ll be glad I did, come retirement.
Thanks.

Thanks Sarnie also, for the confirmation.

[Caddyshack]

Agree with sarnie.

[Groat]

Caddyshack said:

Agree with sarnie.

Really?

What if the one more property you add (or the one you own prior to adding one) fits an exemption criterion?

Or if you buy 6+ residentials to add to your collection.

Plus: what's your take on the scenario where a married couple's main residence's title is in the husband's name only and they sell it then buy a new main residence whose title is in the wife's name only? Assume both own let property in their own names as individuals , and the wife has never owned a main residence in her name, and now has her name on an extra title deed.

She now owns an additional property, but is the law relevant to 'main residence' or name on title? Is she required to PAY the additional LBTT .....or not?

Hint to think about: Was the sold property whose title was in only the husband's name her main residence........or not? If the new property's title is in the wife's name only, is the husband entitled to call it his main residence?

Suggested reference: Matrimonial Homes (Family Protection) (Scotland) Act 1981

Edited by Groat on Thursday 31st October 01:06

[Caddyshack]

If in any doubt you need to ask the Solicitor that is doing the conveyance as it is their indemnity policy that is at risk. In my experience they err on the side of caution and tell you to pay it, if you feel that you have any exemption then make an appeal for a refund, I know of one lady who did get the refund, her Solicitor said she would not risk not paying it.

[Sarnie]

Caddyshack said:

If in any doubt you need to ask the Solicitor that is doing the conveyance as it is their indemnity policy that is at risk. In my experience they err on the side of caution and tell you to pay it, if you feel that you have any exemption then make an appeal for a refund, I know of one lady who did get the refund, her Solicitor said she would not risk not paying it.

Yep, it's the solicitors realm to give advice on this.

I know a Mortgage Broker who told a client they didn't have to pay the additional SDLT......on completion it turns out they did.......thats currently with the Ombudsman......

[Groat]

Sarnie said:

Yep, it's the solicitors realm to give advice on this.

I know a Mortgage Broker who told a client they didn't have to pay the additional SDLT......

Given that additional stamp duty/LBTT is a relatively recent amendment (re-amended for Scotland) of existing regulation, good luck finding a solicitor who can advise on an issue there's no case law to refer to.

And the only mortgage broker whose opinion is worth taking seriously is one qualified and experienced in tax law and its interpretation.

A sensible solicitor will refer it to advocarial opinion. And if the matter has no close precedent, counsel may well prefer further reversion to judicial opinion perhaps including on the draughtsman's original intention for the legislation.

In the case I outlined, it might well be that it was never the draughtsman's intention to 'catch' a couple unawares in a 'tax trap' and it would therefore be unfair and unreasonable of HMRC to enforce legislation in a way that does exactly that.

[Caddyshack]

Sarnie said:

Caddyshack said:

If in any doubt you need to ask the Solicitor that is doing the conveyance as it is their indemnity policy that is at risk. In my experience they err on the side of caution and tell you to pay it, if you feel that you have any exemption then make an appeal for a refund, I know of one lady who did get the refund, her Solicitor said she would not risk not paying it.

Yep, it's the solicitors realm to give advice on this.

I know a Mortgage Broker who told a client they didn't have to pay the additional SDLT......on completion it turns out they did.......thats currently with the Ombudsman......

If it’s the one I read about the ruling was appealed and the broker had to pay about 19k.

[Groat]

Caddyshack said:

If it’s the one I read about the ruling was appealed and the broker had to pay about 19k.

If that's the Mr H and Mr S case, here's a comment on it:

"FOS has come up with an appalling decision here. While I can understand the adviser has been an idiot in a way deserves to pay something but what about the client's solicitor. Correct me if I am wrong but the solicitor should be having a conversation about SDLT before allowing their clients to enter into a binding contract? If the solicitor had the conversation with the clients they are quite obviously not telling the truth to FOS and if the solicitor didn't have this conversation (and I doubt that this wouldn't have taken place) then surely the solicitor is to blame? This just stinks of FOS taking the easy option however I would really welcome other feedback in case I am missing something".

I'd go further.....

Did anyone at any time bother to question the solicitor's opinion on the matter and how he reached it?

Lower court and tribunals do create case law, but it's often very weak. The matter definitely needs the smart wigs to argue in front of a
serious and senior bench. Questions should include whether or not Mr S (as well as Mr H) was replacing his main residence with the new property. Along with what happened to Mr H's right to relief by replacing main residence? And much more.

Edited by Groat on Thursday 31st October 15:40

[Caddyshack]

I too thought that surely the conveyancing Solicitor must have had an opinion that the higher stamp should have been paid or the clients have lied.

I am amazed that the FOS found the Broker totally at fault without a reality check.

[996owner]

Had a battle with SDLT recently.

We own a BTL (was our main residence 8 years ago) . We have been renting ourselves since (needed to move for work). BTL is in my wife name only, nothing in mine.

Fast forward to this year and we decided to buy a house for us to live in, our main residence.
Solicitor said lower rate of stamp duty as we are buying a main residence. He was fully aware of BTL! 1 week before completion we were told higher rate.

The test posted above is true. "will this result in you owning an additional property? Yes = higher rate . No = lower rate"

I spoke to HMRC and they said it matters NOT if its a main residence to the test. I said that higher rate isn't ment to hit main residence property and their response was " as you are not selling your current residence (you cant because its not yours to sell) you are not releasing a house back to the market therefore higher rate" test above applies.

If we sell our BTL within 3 years we can get the extra tax back.

[Sarnie]

Caddyshack said:

I too thought that surely the conveyancing Solicitor must have had an opinion that the higher stamp should have been paid or the clients have lied.

I am amazed that the FOS found the Broker totally at fault without a reality check.

The Broker should have just steered clear of giving advice he's not authorised to..........self-employed clients often ask me "What do my figures needs to show for me to get a mortgage?"......................I can't give advice on clients income and tax details.........the broker should have simply told the client to check the SDLT requirements with their solicitor....

[Groat]

996owner said:

Had a battle with SDLT recently. (and other stuff above)

This is lifted from www.gov.uk :

"You must pay the higher SDLT rates when you buy a residential property (or a part of one) for £40,000 or more, if ALL the following apply:

• it will not be the only residential property worth £40,000 or more that you own (or part own) anywhere in the world"

.....and other things.....

Well, in terms of yourself and what you've said above it appears HMRC's opinion falls at the first hurdle, does it not?

What can I say?

When you ask HMRC's opinion you are basically saying "Hi Mr Ravenous Wolf! I'm a little fat piggy wondering what you're having for lunch today"?

At the moment, apart from the most straightforward cases (which is the vast majority of them), anything contentious regarding this largely unproved legislation should NOT be referred for clarification to : A bloke in a pub; a random in a chatroom; a conveyancing solicitor; a mortgage broker; and certainly not to anyone at HMRC unless they can refer you to case law on the matter.

Right now (and for the last 3 years) I've been trying to deal with them re. a national insurance matter. So far I have 4 different versions of explanations of the matter from HMRC. FOUR. In fact the only version I've NOT been given is the one which accepts that it's a fkup on their part (which a blindman can see it actually is).

[Caddyshack]

A friend of mine broke up with her Husband and moved out of the marital home buying a new property. Higher rate SDLT applied.

She then wrote a simple letter to HMRC saying that she felt that the payment was not in the spirit of what the higher rate SDLT was aimed at. She said she felt she needed to move out but could not sell the house.

HMRC took a long time to respond but they agreed and refunded the higher SDLT.