This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Divorced, buying new home and extra stamp duty

Shoreline
Posts:3
Joined:Sat Mar 10, 2018 9:56 am
Divorced, buying new home and extra stamp duty

Postby Shoreline » Sat Mar 10, 2018 10:26 am

My parter and I have been living in a rented flat for over 3 years, we are getting married this month and hope to complete the purchase on a new flat (value over £300k) next month.

I own no other properties.
As part of his divorce, my parner and his ex wife are selling their former marital home (value over £500k) and in line with the divorce finance consent order, they will split the proceeds of the sale 50/50. My partner has not lived in the former marital home for over 3 years.
The sale of their former marital home will not happen until later this year, which will be after we have purchased our flat next month.

Will we have to pay the extra 3 percent stamp duty surcharge on the purchase of our flat next month?
And if we do, will we be egligible for a refund after my partner’s former marital home has been sold later this year?

Thank you for any advice

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

Re: Divorced, buying new home and extra stamp duty

Postby SDLT Geek » Sat Mar 10, 2018 6:10 pm

Before the changes made in the Autumn Budget of 22 November 2017, it would have been clear that you would have had to pay the 3% surcharge to SDLT on your joint purchase and that it would not have been recoverable on his sale (because he last lived in the old house more than three years before buying the new house).

It is possible that the changes with effect from 22 November will save you from having to pay the 3% stamp duty land tax surcharge in the first place. They stop a share in a former marital home from "counting against" a person if there is a "property adjustment order" in place for the benefit of the other spouse, with the other spouse living in the former marital home. That will be worth your looking into further.

Shoreline
Posts:3
Joined:Sat Mar 10, 2018 9:56 am

Re: Divorced, buying new home and extra stamp duty

Postby Shoreline » Sat Mar 17, 2018 6:13 pm

Thank you for your advice SDLT geek - it is appreciated.

Are there any other views on my stamp duty surcharge query.

Thank you

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

Re: Divorced, buying new home and extra stamp duty

Postby maths » Sat Mar 17, 2018 8:23 pm

Far be it from me to disagree with the SDLT guru SDLT Geek but I'm not sure he is correct.

It is true that amendments have been made by the Finance Act 2018 with respect to the 3% charge and divorce etc.

However, the provision to which Geek refers (section 9B) does not apply in your circumstances as once the property is sold the proceeds are to be split 50/50 whereas the new provision requires one party's interest in the property to be effectively transferred for the benefit of the other party.

I suggest you await Geek's response to my post.

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

Re: Divorced, buying new home and extra stamp duty

Postby SDLT Geek » Sat Mar 17, 2018 9:16 pm

The new provisions (to be a new para 9B in FA 2003 Sch4ZA) do require the order to be “for the benefit” of the other party to the marriage/ civil partnership and for the other party to be living in the property. However there is no bar on the retention of an interest in the property.

The point of the provisions is after all to provide a new disregard for surcharge purposes for spouses “tied in” to ownership of property by a property adjustment order.

To get within the provisions there needs to be the right kind of order, it must benefit the ex spouse who must live in the property.

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

Re: Divorced, buying new home and extra stamp duty

Postby maths » Sat Mar 17, 2018 9:28 pm

The order must be an order under MCA 1973 s.24(1)(b), namely, where the court requires settlement of a spouse's interest for the benefit of the other spouse.

It seems to me that if the property was owned 50/50 and under the order a sale was not permitted until a future date (eg children finish full-time eduction) and at which time the sale proceeds were to be split 50/50 then the conditions of s9B are not satisfied.

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

Re: Divorced, buying new home and extra stamp duty

Postby SDLT Geek » Sat Mar 17, 2018 10:21 pm

I am not an expert on matrimonial law, so I am interested in maths' comments. From a quick check on "Practical Law" I see that both Mesher orders and Martin orders are made under s24(1)(b) of the Matrimonial Causes Act 1973 as required by the new para 9B to FA2003/Sch4ZA. I understand that those orders do not have to change the shares in which the home is held. It seems to be s24(1)(a) which is the appropriate provision where a transfer is to be made.

An order under s24(1)(b) does require the making of a "settlement". The answer to the issue is likely to turn on the meaning of "settlement" in this context. In particular whether a trust involving a deferral of sale until conditions are met (such as children reaching a certain age or someone remarrying) means the arrangement is a settlement.

A Mesher order seems to be treated as creating a settlement for cgt purposes: https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65365. But we have to be careful when looking to import cgt reasoning into the interpretation of SDLT legislation, so I mention this hesitantly!

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

Re: Divorced, buying new home and extra stamp duty

Postby maths » Sat Mar 17, 2018 11:01 pm

Under a so-called Mesher order the spouses hold the property as trustees of land the terms of the trust typically allowing one spouse to occupy the property until it is sold (eg children finish full-time education) with sale proceeds split on any sale per the court order.

I don't think (as indicated above) that in the present case one spouse has a major interest in a dwelling which under the Order is to be for the benefit of the other spouse.

Presumably s9B is designed to stop a spouse being treated as owning a major interest when in fact it has been earmarked for the other spouse.

Perhaps the poster can indicate the nature of the Order and whether it was made under MCA 1973 s24(1)(b)?

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

Re: Divorced, buying new home and extra stamp duty

Postby SDLT Geek » Sat Mar 17, 2018 11:11 pm

maths, it is indeed a good idea to ask OP to look at the order to see what provision it says it is made under. I think orders do normally refer to the relevant statutory provision, don't they? That should decide it for OP. Hopefully it refers to s24(1)(b).

It is of course the legislation that sets out the law, not what HMRC meant to say, but for what it is worth here is what appears in the Autumn Budget 2017: overview of tax legislation and rates at 1.42:

"1.42 SDLT Higher Rates As announced at Autumn Budget 2017, the government will legislate in Finance Bill 2017-18 to improve the operation of the Higher Rates of SDLT by granting relief from tax in certain cases where:
•a court order issued on a divorce or dissolution of a civil partnership prevents someone from disposing of their interest in a main residence"

https://www.gov.uk/government/publications/autumn-budget-2017-overview-of-tax-legislation-and-rates-ootlar/autumn-budget-2017-overview-of-tax-legislation-and-rates-ootlar

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

Re: Divorced, buying new home and extra stamp duty

Postby maths » Sun Mar 18, 2018 1:08 am

Just re-read MCA 1973 s24 and FA 2003 Sch 4ZA s9B.

I think in my earlier comments i placed too tight a restriction on what, under s9B, is an "..order has been made in respect of the interest for the benefit of another person..."

If under, for example, a Mesher Order one spouse is not allowed to sell their beneficial interest until a later date because the other spouse plus child is allowed to live in the property for some pre-defined period then this would seem to fall within s9B(1)(b).

As we both agree, was the order made under s24(1)(b) MCA 1973??


Return to “Stamp Duty, Stamp Duty Land Tax, SDLT”