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

Which is the main residence?

Overleigh
Posts: 40
Joined: Thu Oct 13, 2011 9:41 am

Which is the main residence?

Postby Overleigh » Sun Jun 23, 2019 10:11 am

My wife and I married last November.

Prior to our marriage we had two homes: mine in Somerset, my wife’s in Devon.

We intend to sell both homes and buy a new home within the “18 month IHT window”.

We propose, in this chronological order, to:
1. Sell one of our two homes
2. Buy a new home
3. Sell the second of our two original homes.

As I understand it, the first home to be sold must be viewed by HMRC as our main residence, otherwise we would pay an extra 3% stamp duty on the purchase of our new home, which leads to the question, “Which of the two homes is our main residence in the view of HMRC?”

The facts are:
Home 1 in Somerset
1. Owned by myself
2. I work part time in Somerset
3. My car insurance bears this address
4. GP, dentist etc are all in Somerset
5. I live in this house, on average, 5 days out of 7.

House 2 in Devon
1. Owned by my wife
2. Occupied by my wife and her adult son (his car insurance bears this address)
3. Until very recently my wife worked part time in Devon
4. Her GP, dentist etc are all in Devon
5. She lives in this house, on average, 13 days out of 14.

I would be grateful to know which of the two homes HMRC would consider to be the main residence.

maths
Posts: 7561
Joined: Wed Aug 06, 2008 3:25 pm

Re: Which is the main residence?

Postby maths » Sun Jun 23, 2019 12:08 pm

I'm not clear if your concerns are about CGT or SDLT even though you refer to IHT?

Married couples can only have one primary residence. You/wife need to elect which of the two properties you wish to be your primary residence from the date of marriage.

Irrespective of which of the two properties you elect as your primary residence from date of marriage a sale of either property within 18 months thereof will mean no CGT charge on any gain arising on sale.

For SDLT 3% charge purposes it is not possible to elect which of two properties is a primary residence; it is purely a question of fact. On the face of it the property you own appears to be on the facts your primary residence and your wife's is the property she owns. Neither of you seem to spend much time living together in either property.
If this is correct, then the 3% SDLT charge would appear to apply as the exemption for replacement residence would not be satisfied within any 3 year period.

If you had lived together in one of the properties post marriage so that property could be categorised as your primary residence then the 3% SDLT charge could in principle be avoided.

Alternatively, the 3% SDLT charge could be avoided if one of you sold a property and you both lived in the other property prior to its sale followed by a new purchase or both properties are sold and then a new property is purchased.

Overleigh
Posts: 40
Joined: Thu Oct 13, 2011 9:41 am

Re: Which is the main residence?

Postby Overleigh » Sun Jun 23, 2019 12:42 pm

Thank you maths.

Your answer has helped me realise I was making a fundamental error. Of course, when the first house is sold we then only have one house which will automatically be our main (& only) residence. And then, to avoid the extra 3% SDLT we need to sell the second house on the same date we buy the new house.

Thanks again.

Overleigh
Posts: 40
Joined: Thu Oct 13, 2011 9:41 am

Re: Which is the main residence?

Postby Overleigh » Sun Jun 23, 2019 5:30 pm

Reviewing what I wrote, I realise I made a typo: I should have written "18 month CGT window, not IHT.

Overleigh
Posts: 40
Joined: Thu Oct 13, 2011 9:41 am

Re: Which is the main residence?

Postby Overleigh » Sun Jun 23, 2019 9:27 pm

I am still muddled over one area, so please forgive the further question.
Can I clarify: where a couple have 2 homes and one is clearly the main residence, if they sell the main residence to replace with a new main residence, am I correct in understanding that they are not liable to the higher rate of SDLT?

maths
Posts: 7561
Joined: Wed Aug 06, 2008 3:25 pm

Re: Which is the main residence?

Postby maths » Mon Jun 24, 2019 12:19 am

On re-reading my ;post out seems a bit ambiguous.
Can I clarify: where a couple have 2 homes and one is clearly the main residence, if they sell the main residence to replace with a new main residence, am I correct in understanding that they are not liable to the higher rate of SDLT?
In the above circumstances on the joint purchase of a new main/sole residence post the sale of the former main residence the 3% SDLT charge would not apply to the purchase.

Avoidance of the 3% SDLT charge would also apply in the above circumstances even if the purchase was effected by one spouse only.

Overleigh
Posts: 40
Joined: Thu Oct 13, 2011 9:41 am

Re: Which is the main residence?

Postby Overleigh » Mon Jun 24, 2019 9:28 am

Maths, thank you once again for your help.

I understand from your first reply to my original question that in our situation (the 2 homes owned by my wife and I since marriage ) there is no clear "main residence". This raises the question, "What steps could we take to establish one of the two houses as our main residence?"

If, for example, my wife lived with me in my Somerset house 5 days out of 7 and moved her GP to Somerset would that be sufficient to establish the Somerset house as the main residence? Or, conversely, if I were to live with my wife in Devon 5 days out of 7 and move my car insurance address to the Devon house would that be sufficient to establish the Devon house as our main residence?

We are not trying to get around any rules; we simply would like the option of selling our main residence - which ever one it is - to buy our new, future main residence before selling the other second home.
We could sell either of the Somerset and Devon houses first, but, at this moment, we are unsure which is the main residence.

Overleigh
Posts: 40
Joined: Thu Oct 13, 2011 9:41 am

Re: Which is the main residence?

Postby Overleigh » Mon Jun 24, 2019 7:02 pm

I spent half an hour on the phone to HMRC today. The person who helped me checked the manuals and concluded it was not at all clear which home would be considered the main residence.
She suggested writing to the Birmingham office, but warned me it would take 40 days to get a ruling.

SDLT Geek
Posts: 171
Joined: Sun Apr 30, 2017 5:45 pm

Re: Which is the main residence?

Postby SDLT Geek » Mon Jun 24, 2019 7:54 pm

These comments might help:
1. There are special rules for capital gains tax which can mean that a married couple can only have one main residence between them. These rules are not replicated for SDLT.
2. It is possible, though it will be unusual, for a married couple (who are not separated in a relationship sense) to have different main residences. One of the factors to take account of (where someone splits their time between homes) is which of the homes is where the partner / children of the family live.
3. For example someone might have a city flat handy for work where they sleep 5 nights a week, returning at weekends etc to a country home where a spouse and children live. The country home is likely to be the person’s main residence.
4. SDLT works for joint buyers by requiring one to look at them each individually as if buying alone. If for any one of them the surcharge would be due, then it is due for the whole transaction.
5. For a married couple who are not separated (in a relationship sense) then even if only one of them buy, the transaction is still tested for surcharge purposes as if the other spouse was also buying.

Overleigh
Posts: 40
Joined: Thu Oct 13, 2011 9:41 am

Re: Which is the main residence?

Postby Overleigh » Tue Jun 25, 2019 9:16 am

Thank you Geek. That is very helpful.


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