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Where Taxpayers and Advisers Meet

Divorce: is SDLT payable in this situation?

DevonBen
Posts:8
Joined:Tue Jun 20, 2017 4:54 pm
Divorce: is SDLT payable in this situation?

Postby DevonBen » Tue Jun 20, 2017 4:58 pm

Hi, any input gratefully received. I am currently getting divorced from my wife. We are transferring my ownership of the former jointly-owned matrimonial home to her sole name. This is in the consent order. I will, however, retain a legal charge over the home, and when my wife decides to sell it (her decision) my charge will come into force. Will I have to pay the surcharge on the new home I am currently in the process of buying? I have had conflicting advice on this. Many thanks!

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Divorce: is SDLT payable in this situation?

Postby maths » Tue Jun 20, 2017 11:29 pm

The 3% SDLT charge requires, inter alia, that on completion of the purchase of a dwelling you own a major interest in another dwelling.

A major interest is defined as a term of years absolute or a leasehold interest; basically a freehold or leasehold interest.

In your case you appear to have a deferred charge order (ie you receive a sum of money as and when ex-spouse sells property).

Such an order does not constitute a major interest and hence the 3% SDLT charge does not apply.

DevonBen
Posts:8
Joined:Tue Jun 20, 2017 4:54 pm

Re: Divorce: is SDLT payable in this situation?

Postby DevonBen » Wed Jun 21, 2017 11:31 am

Many thanks indeed. It has been so hard to ascertain what is meant by a "major interest", and your definition makes common sense to me. It would be helpful if the HMRC could list this as an example on their website, but I guess my situation is not exactly commonplace. Many thanks again.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Divorce: is SDLT payable in this situation?

Postby maths » Wed Jun 21, 2017 12:24 pm

"Major interest" is defined in FA 2003 s117 but slightly modified by Sch 4ZA para 2(4) for the 3% SDLT purposes.

DevonBen
Posts:8
Joined:Tue Jun 20, 2017 4:54 pm

Re: Divorce: is SDLT payable in this situation?

Postby DevonBen » Wed Jun 21, 2017 1:33 pm

Many thanks!

SDLT Geek
Posts:232
Joined:Sun Apr 30, 2017 5:45 pm

Re: Divorce: is SDLT payable in this situation?

Postby SDLT Geek » Wed Jun 21, 2017 9:22 pm

A thought here. You say there is a consent order saying what is to happen: that you will transfer your share in the property and take a deferred charge instead. I agree with maths that once this happens you will no longer have a "major interest" in the former matrimonial home. But that transfer does need to be completed before your purchase completes. A common problem is that the finalisation of the assignment is subject to the vagaries of a mortgagee of the matrimonial home.

DevonBen
Posts:8
Joined:Tue Jun 20, 2017 4:54 pm

Re: Divorce: is SDLT payable in this situation?

Postby DevonBen » Thu Jun 22, 2017 9:51 am

Thanks for the thought. I am afraid the transfer will occur after the purchase completes, so I realise I will have to pay the surcharge. Luckily I have the cashflow to handle this (just) but as soon as the transfer goes through (probably a month later) I was then hoping to ask HMRC for a refund. Do you foresee a problem with this plan of action? [It is unlikely I can persuade the seller to delay completion for me - especially when the date the transfer goes through is open-ended.] There is no outstanding mortgage.

SDLT Geek
Posts:232
Joined:Sun Apr 30, 2017 5:45 pm

Re: Divorce: is SDLT payable in this situation?

Postby SDLT Geek » Thu Jun 22, 2017 8:43 pm

I do not foresee a problem with you reclaiming the surcharge on a later transfer of your interest in the former matrimonial home so long as you had lived in that as your only or main residence at some point within the three years leading up to the purchase of your new home. That is because the three year rules are already in place where the sale completes after the purchase.

DevonBen
Posts:8
Joined:Tue Jun 20, 2017 4:54 pm

Re: Divorce: is SDLT payable in this situation?

Postby DevonBen » Fri Jun 23, 2017 8:32 am

Yep, I should be alright. I lived in that house until the separation 8 months ago. The purchase completes in the next few weeks. I should be submitting the application to transfer ownership within the next few weeks (as the consent order will be signed imminently), with likely formalisation of that being a month after submission of the application (given Land Registry processing times).

SDLT Geek
Posts:232
Joined:Sun Apr 30, 2017 5:45 pm

Re: Divorce: is SDLT payable in this situation?

Postby SDLT Geek » Fri Jun 23, 2017 9:04 pm

Good news. What will be the time difference between:

1. The date of completion of your purchase
2. The date put in the signed tranfer to your wife (not the later date of registration at the Land Registry)?

If it is less than 30 days you might be able to benefit from some HMRC guidance to the effect that, if by the time you put in the land transaction return for the purchase the later sale has gone through, you can make the return on the basis that the surcharge does not apply. This is instead of the strict position that the surcharge should be paid and then recovered.


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