The 3%

[JJD]

Hello,

18 months ago my mother died and left me a flat. I already owned a property, which I sold four months ago. I moved into the flat. I'm about to buy another property, but won't be selling the flat immediately. Will I have to pay the extra 3%? HMRC told me not, but my conveyancing solicitor told me I would. Confusion reigns. Any advice appreciated,

Many thanks.
JJD

[SDLT Geek]

There are a few issues here.

First of all the flat will not have belonged to you immediately on your mother's death. It would have been part of her unadministered estate. Perhaps the estate has now been administered and the flat assented to you or appropriated to you? I will assume the flat has come to you as otherwise the higher rates of stamp duty land tax for additional properties would not be an issue for your upcoming purchase.

You explained that you sold another property four months ago. If you had lived in that as your only or main residence then that might help you in your upcoming purchase. Are you planning to live in the property you are buying as your only or main residence? If so, it seems likely that the exception from the 3% surcharge for the replacement of an only or main residence (the replacement exception) is likely to apply to your purchase.

But if timings were unfortunate there could be an issue. You say that you sold another property four months ago. If after that sale you were assented the flat, then it is possible that the sale is "used up" for the purposes of the replacement exception. I see that you are living in the flat. If you acquired the flat after you sale intending to live in the flat as your only or main residence, then the replacement exception will not apply to the upcoming purchase.

[JJD]

Thanks for your reply, which was much more coherent than my solicitor could manage! I was the executor of my mother's estate and despite the lapse of 18 months, I've not yet registered as the owner of the flat with the Land Registry, although I am paying Council Tax and all other bills.

The property I sold was my only residence and I didn't come to the flat until after I had sold that property, which was four months ago. Until then it had stayed empty. It was and is a stop gap residence until I can find another property to live in permanently and which will be my main residence.

Does that clarify matters? What do you think?

Regards,
JJD

[maths]

It is clear you do not intend that your mother's flat is a flat into which you intend to move with a view to making that flat your residence; it is a stop-gap.

You have sold a property which was your residence and you intend to purchase another property which is then to be your residence. The 3% will not apply subject to below.

The key point is whether at the date of completion (not exchange) on your new purchase you have a major interest in another property. Mother died 18 months ago. If her estate comprises primarily the property she left you and cash at bank, personal possessions (ie not a large or complex estate) it is highly likely that her estate will have been duly administered and you will have already acquired the beneficial interest in her property. In which case the 3% will apply to your proposed purchase. Given that you as yet (presumably) haven't even exchanged on your new purchase it is even more likely to be the case that as and when you complete you will definitely have acquired a beneficial interest in mother's property.Where you have registered her property in your name at LR is irrelevant.

I am assuming you didn't inherit mother's flat with anyone else.

[SDLT Geek]

I agree with most of what Maths says, but not quite all of it. My view is that if, as seems the case all the following apply:

1. You used to live in the house that was sold 4 months ago (it was your only residence).

2. You are proposing to buy a property to live in as your only or main residence (and that purchase is to complete within 3 years of the sale mentioned above).

3. If you have acquired a property interest in your mother's flat (and I agree with what maths says about that) it was not with the intention of living in it as your only or main residence, if you are genuinely occupying the flat short term only as a stop gap measure.

then the exception from the 3% surcharge for the replacement of an only or main residence will still apply even if you have your mother's flat at the date of the proposed purchase (indeed, you could have other property interests and still rely on the replacement exception if you met those conditions).

[bd6759]

I agree with SDLT Geek.

The replacement of the previous residence provision applies because he has not, in the period since he sold his old residence, acquired an interest in a dwelling that he intends to be his main residence. He will therefore be replacing his residence when he purchases his new residence.

[JJD]

Thank you so much for your advice, guys, it has been extremely useful. HMRC seem to be of the same opinion and pointed me to p8 of the guidance notes (Nov 2016) Higher Rates for Purchaser of Additional Properties, which quite clearly indicates that I should not be subject to the 3%. They also mentioned that Solicitors might be not up to date on the change in the Law. They did not know why my solicitor was not up to date...

Once again, many thanks, your advice has been invaluable.

Regards,
JJD

[maths]

Agreed.