Another SDLT Question- Solicitors don't agree
Discussion
My son jointly owns a flat with his brother- it was bought with funds from a trust left to them by their late grandfather. He didn't contribute anything towards the purchase, nor was any SDLT due. He has never lived in the flat.
He and his GF (of 9 years, they're engaged, no registered civil partnership) rent a house currently- it's their primary residence.
They're trying to buy their first home (£507k). We all agree they can't claim the first-time buyers' relief and pay just £4k SDLT.
One solicitor says they should pay £28k because it's his second home, but the question is, "Replacing the main residence?". He is not replacing the flat with this house, but the flat is not his main residence.
Another solicitor says Yes (they will move out of their rental where they are registered for council tax and electoral role, driver's licence, passports, etc), and the SDLT is £12k.
Has anyone else come across this or a similar scenario?
He and his GF (of 9 years, they're engaged, no registered civil partnership) rent a house currently- it's their primary residence.
They're trying to buy their first home (£507k). We all agree they can't claim the first-time buyers' relief and pay just £4k SDLT.
One solicitor says they should pay £28k because it's his second home, but the question is, "Replacing the main residence?". He is not replacing the flat with this house, but the flat is not his main residence.
Another solicitor says Yes (they will move out of their rental where they are registered for council tax and electoral role, driver's licence, passports, etc), and the SDLT is £12k.
Has anyone else come across this or a similar scenario?
Edited by SterlingMess on Friday 12th January 11:34
Firstly: I'm not alawyer
Secondly: If the GF bought the new house on her own, would she qualify as first time buyer? If so can she not buy the property 100% to get relief. Then post purchase gift 50% to the BF?
Clarification: Are they engaged (no legal status) or do they have a civil partnership i.e. registered relationship.
Secondly: If the GF bought the new house on her own, would she qualify as first time buyer? If so can she not buy the property 100% to get relief. Then post purchase gift 50% to the BF?
Clarification: Are they engaged (no legal status) or do they have a civil partnership i.e. registered relationship.
The relief for replacing main residence only applies if you SELL one home and BUY another. Moving from a rental main home to a bought bought main home doesn't count.
Government website is absolutely clear,
https://www.gov.uk/hmrc-internal-manuals/stamp-dut...
"To be a replacement of a main residence the old property must be disposed of. To meet this requirement, it must have been owned by the purchaser of the new property or their spouse /civil partner, as well as occupied by them as their main residence.
"Where a purchaser previously lived in accommodation which they (or their spouse or civil partner) did not own, then moving out of this accommodation does not count as replacing their main residence."
Government website is absolutely clear,
https://www.gov.uk/hmrc-internal-manuals/stamp-dut...
"To be a replacement of a main residence the old property must be disposed of. To meet this requirement, it must have been owned by the purchaser of the new property or their spouse /civil partner, as well as occupied by them as their main residence.
"Where a purchaser previously lived in accommodation which they (or their spouse or civil partner) did not own, then moving out of this accommodation does not count as replacing their main residence."
Thank you. They have considered this, but the GF would not get the mortgage on her own salary.
Mr Overheads said:
Firstly: I'm not alawyer
Secondly: If the GF bought the new house on her own, would she qualify as first time buyer? If so can she not buy the property 100% to get relief. Then post purchase gift 50% to the BF?
Clarification: Are they engaged (no legal status) or do they have a civil partnership i.e. registered relationship.
Secondly: If the GF bought the new house on her own, would she qualify as first time buyer? If so can she not buy the property 100% to get relief. Then post purchase gift 50% to the BF?
Clarification: Are they engaged (no legal status) or do they have a civil partnership i.e. registered relationship.
Thank you. I missed the second statement. How can the flat be considered his main residence when he has never resided there? He went from living at home to renting another house.
Panamax said:
The relief for replacing main residence only applies if you SELL one home and BUY another. Moving from a rental main home to a bought bought main home doesn't count.
Government website is absolutely clear,
https://www.gov.uk/hmrc-internal-manuals/stamp-dut...
"To be a replacement of a main residence the old property must be disposed of. To meet this requirement, it must have been owned by the purchaser of the new property or their spouse /civil partner, as well as occupied by them as their main residence.
"Where a purchaser previously lived in accommodation which they (or their spouse or civil partner) did not own, then moving out of this accommodation does not count as replacing their main residence."
Government website is absolutely clear,
https://www.gov.uk/hmrc-internal-manuals/stamp-dut...
"To be a replacement of a main residence the old property must be disposed of. To meet this requirement, it must have been owned by the purchaser of the new property or their spouse /civil partner, as well as occupied by them as their main residence.
"Where a purchaser previously lived in accommodation which they (or their spouse or civil partner) did not own, then moving out of this accommodation does not count as replacing their main residence."
I had a similar conundrum a few years ago when I brought my place. I initially paid the additional duty but then contacted HMRC and got the amount reimbursed.
Have you used the HMRC stamp duty calculator? I used that to prove that I should not have paid it in the first place and within a few weeks was issued a refund by them.
My solicitor also said that I should have paid it since my wife & I own BTL's.
Have you used the HMRC stamp duty calculator? I used that to prove that I should not have paid it in the first place and within a few weeks was issued a refund by them.
My solicitor also said that I should have paid it since my wife & I own BTL's.
Thank you. That's interesting, I'm glad HMRC refunded, but it's a risky strategy!
Yes, we've used the calculator:
It all boils down to the definition of "main residence". According to the manual linked above, it does suggest we should answer No for replacing the main residence (SDLT=£28k versus £12k) when the flat is not and has never been his "main residence" per the pointers lower down in the manual. The additional £14k is a show-stopper for them and boils down to interpretation. They want to get on the property ladder and free up their rental, but HMRC is working against them.
Yes, we've used the calculator:
It all boils down to the definition of "main residence". According to the manual linked above, it does suggest we should answer No for replacing the main residence (SDLT=£28k versus £12k) when the flat is not and has never been his "main residence" per the pointers lower down in the manual. The additional £14k is a show-stopper for them and boils down to interpretation. They want to get on the property ladder and free up their rental, but HMRC is working against them.
EmilA said:
I had a similar conundrum a few years ago when I brought my place. I initially paid the additional duty but then contacted HMRC and got the amount reimbursed.
Have you used the HMRC stamp duty calculator? I used that to prove that I should not have paid it in the first place and within a few weeks was issued a refund by them.
My solicitor also said that I should have paid it since my wife & I own BTL's.
Have you used the HMRC stamp duty calculator? I used that to prove that I should not have paid it in the first place and within a few weeks was issued a refund by them.
My solicitor also said that I should have paid it since my wife & I own BTL's.
I think so too, but probably the intent was to tax the BTLs rather than the main residence. Out if interest, what's your interpretation of "main residence"? Is it the place where you mainly reside (where you're registered to vote, all you post goes to), or is it a flat left to you by a relative and in which you have never resided?
scot_aln said:
I thought the intent of the additional SDLT when it was introduced in 2015 or thereabouts was basically to tax those that had more than 1 property whether that be a holiday home, buy to let or just a multiple home.
pork911 said:
perhaps instruct the solicitor with the £12k opinion to confirm their advice in writing along with details of their professional indemnity insurance 
This. OP are you dealing with a solicitor or a conveyancer? If the latter, request it is passed to a partner for their view.
SterlingMess said:
I think so too, but probably the intent was to tax the BTLs rather than the main residence. Out if interest, what's your interpretation of "main residence"? Is it the place where you mainly reside (where you're registered to vote, all you post goes to), or is it a flat left to you by a relative and in which you have never resided?
It wasn't the only factor but was the final deciding factor to sell our buy to let after our solicitor had defined that we would be liable for the increased SDLT when we started the purchase of our home. At that time we had sold primary residence, were renting and owned 1 BTL. scot_aln said:
I thought the intent of the additional SDLT when it was introduced in 2015 or thereabouts was basically to tax those that had more than 1 property whether that be a holiday home, buy to let or just a multiple home.
It's been nearly 10 years but do remember challenging this at the time but the thinking (hazy after 8+ years) was buying new primary residence was still a second property. If the first property (BTL) was actually a previous primary residence and we sold within 3 years then we would get a refund of the additional tax.
I definitely don't recall all the pages of HMRC content existing at the time but there are some good legal folk on here that should be able to give a proper defintion.
Thank you for thinking back 8 years- I believe the tax has changed a few times since (the thresholds changed after the pandemic), indeed, the GOV. manual linked above was last updated yesterday!
The specific case isn't mentioned, so it's down to interpretation. What is the purpose of the punitive tax? It's to discourage BTLs not buying a main residence. What is a "main residence"? It is where you mainly reside or not?
It's been nearly 10 years but do remember challenging this at the time but the thinking (hazy after 8+ years) was buying new primary residence was still a second property. If the first property (BTL) was actually a previous primary residence and we sold within 3 years then we would get a refund of the additional tax.
I definitely don't recall all the pages of HMRC content existing at the time but there are some good legal folk on here that should be able to give a proper defintion.
The specific case isn't mentioned, so it's down to interpretation. What is the purpose of the punitive tax? It's to discourage BTLs not buying a main residence. What is a "main residence"? It is where you mainly reside or not?
scot_aln said:
SterlingMess said:
I think so too, but probably the intent was to tax the BTLs rather than the main residence. Out if interest, what's your interpretation of "main residence"? Is it the place where you mainly reside (where you're registered to vote, all you post goes to), or is it a flat left to you by a relative and in which you have never resided?
It wasn't the only factor but was the final deciding factor to sell our buy to let after our solicitor had defined that we would be liable for the increased SDLT when we started the purchase of our home. At that time we had sold primary residence, were renting and owned 1 BTL. scot_aln said:
I thought the intent of the additional SDLT when it was introduced in 2015 or thereabouts was basically to tax those that had more than 1 property whether that be a holiday home, buy to let or just a multiple home.
It's been nearly 10 years but do remember challenging this at the time but the thinking (hazy after 8+ years) was buying new primary residence was still a second property. If the first property (BTL) was actually a previous primary residence and we sold within 3 years then we would get a refund of the additional tax.
I definitely don't recall all the pages of HMRC content existing at the time but there are some good legal folk on here that should be able to give a proper defintion.
I think you're missing the point.
- Everyone to gets to be "first time buyer" when they buy their first residential property, whether or not they ever live in it.
- Anyone who buys an additional residential property will always pay full SDLT.
- If you own ONE residential property which you live in as main residence - and then you sell that main residence to buy a new main residence, that purchase gets SDLT at the lower rate.
- If you own TWO or more properties, ONE of which you live in as main residence - and then you sell THAT main residence to buy a new main residence, that purchase gets SDLT at the lower rate.
Thanks for clarifying. His grandfather will be turning in his urn to think his good intention has given his grandson such a predicament.
What options does he have to legally avoid the full SDLT?
Sell his share in the flat to his brother? I don't think so because, presumably, you can be a "first-time buyer" only once.
Postpone buying this house, buy another flat or house below with SDLT threshold, live in it for a while, then dispose of it to buy the bigger house?
What options does he have to legally avoid the full SDLT?
Sell his share in the flat to his brother? I don't think so because, presumably, you can be a "first-time buyer" only once.
Postpone buying this house, buy another flat or house below with SDLT threshold, live in it for a while, then dispose of it to buy the bigger house?
Panamax said:
I think you're missing the point.
- Everyone to gets to be "first time buyer" when they buy their first residential property, whether or not they ever live in it.
- Anyone who buys an additional residential property will always pay full SDLT.
- If you own ONE residential property which you live in as main residence - and then you sell that main residence to buy a new main residence, that purchase gets SDLT at the lower rate.
- If you own TWO or more properties, ONE of which you live in as main residence - and then you sell THAT main residence to buy a new main residence, that purchase gets SDLT at the lower rate.
Basically, if at the end of the transaction you end up with more properties than you started with you have to pay SDLT.
As others have said, if you sell your main residence to buy another house you don't pay SDLT as you will end up with the same number of houses you started with. (Sell one (-1) buy one (+1))
If you have a rental and buy a house to live in with no primary residence to sell you will end up with one more house than you started with and have to pay SDLT.
As others have said, if you sell your main residence to buy another house you don't pay SDLT as you will end up with the same number of houses you started with. (Sell one (-1) buy one (+1))
If you have a rental and buy a house to live in with no primary residence to sell you will end up with one more house than you started with and have to pay SDLT.
SterlingMess said:
What options does he have to legally avoid the full SDLT?
Live in the house he already owns so it becomes his main residence for some time. Then sell it later and use the "replacing main residence" relief. SterlingMess said:
Sell his share in the flat to his brother? I don't think so because, presumably, you can be a "first-time buyer" only once.
For the reason you stated, it doesn't work.SterlingMess said:
Postpone buying this house, buy another flat or house below with SDLT threshold, live in it for a while, then dispose of it to buy the bigger house?
That could work but is a lot of faffing. The costs of buying and selling a place he doesn't need could well exceed the SDLT saving!Thanks, Joey. I now have it. I'm just annoyed that HMRC's definition of "main residence" can mean a property you've never lived in and not the one where you're registered to vote and actually live. They should change it from "main residence" to "first owned property" to avoid any ambiguity.
Joey Deacon said:
Basically, if at the end of the transaction you end up with more properties than you started with you have to pay SDLT.
As others have said, if you sell your main residence to buy another house you don't pay SDLT as you will end up with the same number of houses you started with. (Sell one (-1) buy one (+1))
If you have a rental and buy a house to live in with no primary residence to sell you will end up with one more house than you started with and have to pay SDLT.
As others have said, if you sell your main residence to buy another house you don't pay SDLT as you will end up with the same number of houses you started with. (Sell one (-1) buy one (+1))
If you have a rental and buy a house to live in with no primary residence to sell you will end up with one more house than you started with and have to pay SDLT.
Joey Deacon said:
Basically, if at the end of the transaction you end up with more properties than you started with you have to pay SDLT.
As others have said, if you sell your main residence to buy another house you don't pay SDLT as you will end up with the same number of houses you started with. (Sell one (-1) buy one (+1))
If you have a rental and buy a house to live in with no primary residence to sell you will end up with one more house than you started with and have to pay SDLT.
That’s not correct. It’s the 3% additional SDLT you don’t have to pay if you make a qualifying disposal within a certain period. As others have said, if you sell your main residence to buy another house you don't pay SDLT as you will end up with the same number of houses you started with. (Sell one (-1) buy one (+1))
If you have a rental and buy a house to live in with no primary residence to sell you will end up with one more house than you started with and have to pay SDLT.
HMRC ask for clear details of both transactions on the relevant form.
The issue here, as others have said, is the existing property ownership that already exists.
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