Reclaim stamp duty

[martinjones1950]

My daughter married a man who owned a flat.They later married and bought a house, as he already owned a property they had to pay the additional stamp duty on the house,which became their main residence, the flat was let. Unfortunately he died recently and the flat is to be sold, can my daughter now claim back the additional stamp duty paid on the main residence when the flat is sold??

[maths]

No reclaim is possible if the flat was never occupied as a residence.

[SDLT Geek]

Maths is right. But if the man lived in the flat as his only or main residence at some time in the three years before the joint purchase of the house, and if the flat is sold within three years of the completion of the purchase of the house, then the 3% surcharge paid on the purchase of the house should be recoverable.

[maths]

Who owned the flat pre death and who owned it after the death?

[martinjones1950]

Hi all, thanks for the responses. My late son in law lived in the flat with my daughter prior to getting married, he was the sole owner, after getting married they moved away and bought a house together.So they lived in the flat for a period within 3 years of buying the house, they bought the house in June 2016 and he died in July this year. The flat, which has tenants is now due to be sold. The flat is still mortgaged but the house was purchased outright. I find the government website for reclaims confusing as it only caters for sale of the second property and not, as in my case the first.

[martinjones1950]

By the way, my daughter now owns the flat as part of the estate of her late husband.

[maths]

I would suggest that the 3% can be reclaimed.

The daughter was a joint purchaser of the new home in June 2016.

She has acquired the flat post death of her husband. She formerly lived in the flat as her sole residence. She is now selling the flat.

[SDLT Geek]

I believe the 3% can be reclaimed, but my analysis is rather more involved.

When the house was bought there were two buyers, the daughter and her husband. Ignore what HMRC say about treating a married couple as a unit. It is not what the legislation says and is at best a sloppy shorthand that leads one astray in cases like this where both spouses are buyers.

The legislation says that in the case of joint buyers one looks at the position of each of them as if they were buying alone. If for either of them the surcharge would be due, then it is due for the whole transaction.

At the time of the purchase of the house the daughter would not have to have paid the surcharge had she bought alone. She had no other property interests. So that is not where the problem lay.

The surcharge was due on the house purchase because the husband had another property, the flat, which he had been living in and which he retained. If he, or following his death, his personal representatives dispose of a major interest in the flat within the three years after the house purchase then the house becomes a replacement for the flat and the surcharge can be reclaimed.

So a sale of the flat, including the personal representatives interest, would do it. Interestingly so too might an assent by the prs of their interest in the flat.

[maths]

SDLT Geek, I'm not sure you are correct although the point is I think interesting.

In order for the sale of the flat (a former residence of both parties albeit owned only by the husband) to give rise to a refund of the 3% requires that it is sold by "the purchaser" (ie the purchaser of the house which was purchased by both husband and wife).

Following the death of the husband his interest in the flat passed to his surviving wife.

The flat could have been sold by the executors as part of the administration of the estate (but unlikely) or they would simply assent it to her as the beneficiary to do as she wanted with it.

If the executors had sold it as part of the administration no 3% would be reclaimable as "the purchaser" of the house would not have sold the flat; the executors were not the "purchaser". The executors are a separate body of persons to the deceased.

However, if the flat had been assented to the wife she could then sell it as she was a "purchaser" of the house and the 3% reclaimed.

The perhaps strange aspect is that the wife would be selling a former residence of hers even though she owned no part of the flat until she inherited it.

I stand to be corrected as always.

[SDLT Geek]

There is an update on this topic. I was at a meeting with HMRC today. They now have a settled view on the effect of death in these situations. They have not made it public they say, but they reported that if people write in with the question they will confirm that death involves a disposal of the property held by the deceased. The assets of the deceased move, whether there is a Will or not. They confirm they view this as a disposal for surcharge purposes.

So a person buys Property B to live in before he sells his previous home Property A. The surcharge is due on Property B but the person expects to reclaim it when he sells Property A within 3 years. If the person however dies first (within the 3 years) HMRC accept there is a disposal on death of Property A so the surcharge on Property B can be reclaimed by the person's estate.

So in the case in hand we have to apply the tests for the surcharge separately to the wife and the husband. That is what the statute says. Looking at the wife alone, she was never liable to the surcharge. The surcharge was due because of the husband's circumstances. But on the husband's death Property B becomes a replacement for Property A (by virtue of the disposal on death of Property A) so the surcharge can be reclaimed.