SDLT - am I eligible to claim back higher rate
Discussion
I've been going round and round in circles trying to resolve this with online info and with my solicitor but to no avail. I'm hoping someone can shed some light on where I might stand.
I purchased a property just before lockdown and on the day before completion my solicitor informed me that I would need to pay the higher rate of SDLT. she wasn't sure whether it should be the case so I better pay it "Just to be safe". She would not complete on my behalf without me paying it to HMRC. I was inclined to agree, although it was a bit stressful not knowing this until so close to completion.
The reason for this is because I had another Property that was a BTL. I have owned this BTL for 10years, first purchasing as my main residential property, then when I met my wife I moved into her property and changed this to a BTL, we then split up some years later and I moved back into the BTL as tennants moved out previously and it was sitting empty. This was until I waited for a suitable new home. It was my only residence before my new home and I was on the electoral role, council tax, bills etc for this property (the divorce took much longer than I thought so I settled into the property for a year). Because I had 2 properties I was expected to pay for the additional SDLT.
Now I am settled in my new home I want to sell the BTL property but the solicitor says I cannot claim back the additional tax as I do not have a "normal" previous main residence. The forms on the HMRC website do just keep refering to this main residence term, but I would hope if I sell my property to result in just having 1 property and no others then I should be entitled to the additional refund?
If anyone has any suggestions on a definitive answer that would be great.
I purchased a property just before lockdown and on the day before completion my solicitor informed me that I would need to pay the higher rate of SDLT. she wasn't sure whether it should be the case so I better pay it "Just to be safe". She would not complete on my behalf without me paying it to HMRC. I was inclined to agree, although it was a bit stressful not knowing this until so close to completion.
The reason for this is because I had another Property that was a BTL. I have owned this BTL for 10years, first purchasing as my main residential property, then when I met my wife I moved into her property and changed this to a BTL, we then split up some years later and I moved back into the BTL as tennants moved out previously and it was sitting empty. This was until I waited for a suitable new home. It was my only residence before my new home and I was on the electoral role, council tax, bills etc for this property (the divorce took much longer than I thought so I settled into the property for a year). Because I had 2 properties I was expected to pay for the additional SDLT.
Now I am settled in my new home I want to sell the BTL property but the solicitor says I cannot claim back the additional tax as I do not have a "normal" previous main residence. The forms on the HMRC website do just keep refering to this main residence term, but I would hope if I sell my property to result in just having 1 property and no others then I should be entitled to the additional refund?
If anyone has any suggestions on a definitive answer that would be great.
From what I understand of your situation, you should be entitled to a refund of the 3% surcharge if you sell your other property within 18 months (from completion of your new property).
There is a flowchart in the Background section of the HMRC guidance which should help you here: https://www.gov.uk/government/consultations/consul...
There is a flowchart in the Background section of the HMRC guidance which should help you here: https://www.gov.uk/government/consultations/consul...
Edited by NickXX on Sunday 12th July 22:29
This may be of interest, https://www.taxinsider.co.uk/home-sweet-home-what-...
If a property has been your Only Main Residence at any time during your ownership, then it is deemed to be your OMR for the last three years of your ownership of it, even if you had another OMR at that time. There is also a relief of up to £40,000 against a gain on a property that has been your OMR at any time if you have also let it as residential accommodation at another time during your ownership of it.
As a result of these reliefs, I am often asked by property investors planning to sell a buy to let property how they can make that property their OMR so that they can take advantage of these reliefs.
The other question is “how long do I have to live there?”.
If you want to move into a buy to let property so that it becomes your OMR, then you need to bear all the following in mind:
You can only have one OMR at any one time, so if you have another property you must make the nomination described above – note that if the BTL property has been let, the two year time limit for the nomination starts when the tenants leave and it becomes available for you to occupy.
You should make sure you satisfy all the criteria from HMRC’s instructions quoted above.
You must actually move into the property and use it as your home – just camping out in it for a few weeks with the bare minimum of furniture is not enough.
How long must I live there?
There really is no answer to this question. Take these two examples:
Joe, who has no other properties, gets a job in Liverpool and buys a flat there. He moves in, but after he has lived there for a week he wins the jackpot on the Lottery. He lets the flat and goes on a world cruise for six months. When he returns, he buys a large detached house and moves into it. He sells the flat a couple of years later. The gain on the flat should be exempt because for that one week before he won the lottery, it was clearly his OMR and only the lottery win meant that he did not continue to live there. Because it was his OMR for that one week, the final three years of his ownership (in this case, the whole period of ownership) are exempt from CGT.
Jill, who owns a house and a flat in another part of town, lets the flat and lives in the house. She decides to sell the flat, so she evicts the tenant and moves in. She informs HMRC and her bank, etc., of her change of address. She leaves most of her furniture at the house which she lets her sister use while she is living in the ex-rented flat. She does not like the neighbourhood of the ex-rental flat and so she spends most weekends with her sister in her old house.
After eighteen months of this, she sells the ex-rental flat. I suppose it is possible she will get away with this but if HMRC were to start an Enquiry into her return and find out what had actually been going on, they are very likely to argue that her occupation of the flat was a sham designed to get tax relief on it as her OMR, and deny her that relief.
These are of course two extreme examples but they illustrate the basic principle – if it really is your home – or one of your homes, in the case, say, of a weekend cottage, then it can be your OMR. If you are just living there with one eye on the calendar waiting until you can sell up and claim the relief, then it is probably not your OMR.
If a property has been your Only Main Residence at any time during your ownership, then it is deemed to be your OMR for the last three years of your ownership of it, even if you had another OMR at that time. There is also a relief of up to £40,000 against a gain on a property that has been your OMR at any time if you have also let it as residential accommodation at another time during your ownership of it.
As a result of these reliefs, I am often asked by property investors planning to sell a buy to let property how they can make that property their OMR so that they can take advantage of these reliefs.
The other question is “how long do I have to live there?”.
If you want to move into a buy to let property so that it becomes your OMR, then you need to bear all the following in mind:
You can only have one OMR at any one time, so if you have another property you must make the nomination described above – note that if the BTL property has been let, the two year time limit for the nomination starts when the tenants leave and it becomes available for you to occupy.
You should make sure you satisfy all the criteria from HMRC’s instructions quoted above.
You must actually move into the property and use it as your home – just camping out in it for a few weeks with the bare minimum of furniture is not enough.
How long must I live there?
There really is no answer to this question. Take these two examples:
Joe, who has no other properties, gets a job in Liverpool and buys a flat there. He moves in, but after he has lived there for a week he wins the jackpot on the Lottery. He lets the flat and goes on a world cruise for six months. When he returns, he buys a large detached house and moves into it. He sells the flat a couple of years later. The gain on the flat should be exempt because for that one week before he won the lottery, it was clearly his OMR and only the lottery win meant that he did not continue to live there. Because it was his OMR for that one week, the final three years of his ownership (in this case, the whole period of ownership) are exempt from CGT.
Jill, who owns a house and a flat in another part of town, lets the flat and lives in the house. She decides to sell the flat, so she evicts the tenant and moves in. She informs HMRC and her bank, etc., of her change of address. She leaves most of her furniture at the house which she lets her sister use while she is living in the ex-rented flat. She does not like the neighbourhood of the ex-rental flat and so she spends most weekends with her sister in her old house.
After eighteen months of this, she sells the ex-rental flat. I suppose it is possible she will get away with this but if HMRC were to start an Enquiry into her return and find out what had actually been going on, they are very likely to argue that her occupation of the flat was a sham designed to get tax relief on it as her OMR, and deny her that relief.
These are of course two extreme examples but they illustrate the basic principle – if it really is your home – or one of your homes, in the case, say, of a weekend cottage, then it can be your OMR. If you are just living there with one eye on the calendar waiting until you can sell up and claim the relief, then it is probably not your OMR.
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