Replacement of only or main residence

[Esunshine]

Hi. Regarding the exception to higher rate of SDLT, does there have to be an intention to live in the replacement main residence IMMEDIATELY?

My husband and I each owned a main residence before we met. We both moved abroad and got married. He sold his old house. I have just sold my old house. We rent the house we live in abroad. A year ago we bought a BTL flat in London which is rented out. We are now buying a new house in the UK which we intend to live in when we return to the UK. The house is listed and we have instructed an architect, will get plans drawn up, need to get planning permission and the necessary work done. While we wait for all this we are thinking of letting it out (maybe for 1-2 years). We definitely intend it to be our main residence and will move into once the work is done.

Do you think we fall within the exception to higher rate of SDLT in that we are replacing our main home.

Thank you for your comments!

[maths]

The legislation provides that at the date of completion of the purchase the purchaser intends the dwelling to be the purchaser's only or main residence.

"Intention" is tricky to prove. However, for what it's worth HMRC's view is as follows:

"The test in respect of the new dwelling purchased is a question of intention, does the purchaser intend the dwelling to be his only or main residence? This is a question of intention at the time of purchase, what has the purchaser acquired the property for? The intention test will not only be met if there is an intent to immediately occupy, if some works are to be undertaken before occupation commences, or a short lease is in place before purchase, then this does not prevent the test from being met. If the dwelling is intended to be put to other uses, for example as a source of income, then the intention test will not be met. There may be rare cases of the purchaser’s genuine intention at the time of purchase being frustrated by events." [my italics]

[Esunshine]

Dear Maths
Thank you for taking the time to reply. I did read the paragraph of guidance that you quoted. My thoughts were that at the time of completion (I.e. Now) we do intend the dwelling to be our only or main home albeit we may not occupy it as our main home immediately. Our intention is not to use it as a source of income. We do want to live in it as our family home but after we have done the works to it to make it suitable. I wonder if the short term letting of it necessarily means it cannot be our intention for it to be our main residence?
Would you suggest phoning hmrc to ask for their advice? I am not sure if they would question the transaction if we simply paid the lower duty and if they did and disagreed with us what the consequences would be (I.e. Would we just have to pay the difference between the higher rate and what we had paid or would we have to pay a fine or penalty?). I would be very grateful for your thoughts thank you!

[maths]

The quote I provided merely reflects HMRC's view of the legislation and is not, of course, law.

When they say a "source of income" it's unclear (at least to me) what is exactly meant. If a property is bought with a buy to let mortgage then prima facie this would suggest that it hasn't been purchased with an intention as a sole/main residence.

To some extent "intent" on the day of completion where a person does not move immediately into the property will be ascertained after the event. I would suggest that if after purchase, work is commenced on the property pretty well straight away (making it uninhabitable for a period) and then on finishing the works a person moves in, intent will be satisfied. If you purchase now whilst abroad with the requisite intent that you carry through on your return but whilst abroad arrange architects etc and work then commences before you move in I suggest intent has been satisfied.

That intent should not be affected if you let it out pending work commencing on the property. However, in practice a letting of 2 years might be seen as provocative to HMRC.

[srs259]

Hi, you are going from owning 1 home to owning 2 homes in the UK (ie you are increasing your property ownership). Unfortunately this makes you liable to second home SDLT no matter how your new home is going to be used (BTL or main residence). The replacing the main residence clause applies when the number of homes you own doesn't change at the end of the day (ie if you started with 2 homes and then sold one to replace with another). On the plus side, if you sell your BTL in London within 36 months of becoming second home owners, you can then claim back the 3% extra stamp duty you will have to pay on your new home. Hope that helps. I had clarification from HMRC for something similar.

[someone]

Hi, you are going from owning 1 home to owning 2 homes in the UK (ie you are increasing your property ownership). Unfortunately this makes you liable to second home SDLT no matter how your new home is going to be used (BTL or main residence). The replacing the main residence clause applies when the number of homes you own doesn't change at the end of the day (ie if you started with 2 homes and then sold one to replace with another). On the plus side, if you sell your BTL in London within 36 months of becoming second home owners, you can then claim back the 3% extra stamp duty you will have to pay on your new home. Hope that helps. I had clarification from HMRC for something similar.

This is one of those complicated cases where I think you'll get differing opinions from different people and I think depends critically on when various transactions took place and whether the OPs spouse ever lived in the property most recently sold but I'm pretty certain the last point isn't correct. Selling the BTL after the purchase of the main home will not recover the 3% SDLT if it was due as the BTL was never (I assume) a main home.

[srs259]

Yes apologies, you are correct. I do believe you would have to live in London and have it as your main residence if you wanted to reclaim the 3%.