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Where Taxpayers and Advisers Meet

2nd Property SDLT Refund and Divorce

chris_hart03
Posts:3
Joined:Sat Apr 24, 2021 11:40 am
2nd Property SDLT Refund and Divorce

Postby chris_hart03 » Sat Apr 24, 2021 11:57 am

Hi

I have recently separated from my wife. We owned a home with a joint mortgage and joint tenants. I recently moved out and bought a new home, and in doing so paid the 3% second home SDLT.

We are currently agreeing the terms of the divorce. So far, we have an understanding between us that i have taken cash in exchange for my proportion of the equity i had in the house. I will therefore make no claim to owning the house. However, i am still on the deeds and still on the mortgage, though we have changed this to tenants in common.

The house has a 5 year fixed mortgage on it, and my wife doesnt have enough income to obtain a mortgage on her own. As this is my sons home, we have an understanding that my wife will continue to make the payments (as our financial separation in the divorce will state this), but i will remain joint on the mortgage for as long as my sons needs this. I understand i will likely be liable for this debt, credit link and so on, but my son has special needs and so dont want to add a changing house into what is already a period of huge change.

However, i am keen to understand whether i can claim a refund on the second home SDLT that i have paid. I bought my new home 4 months ago.

Is there a process i can follow, or any set of forms i can fill in with/without the help of a solicitor that i can follow whereby i can in effect relinquish ownership of the home my wife will keep such that i can honestly say i only own one home and claim a refund, while also ensuring the mortgage company are happy such that i dont cause any problems for my son remaining in his home?

Any help greatly appreciated on what i would need to do or a rough process i would need to follow. Equally, if this is all too complicated ofr any advice, is it a tax, property or divorce expert i need!

Thanks,
Chris

maths
Posts:8281
Joined:Wed Aug 06, 2008 3:25 pm

Re: 2nd Property SDLT Refund and Divorce

Postby maths » Sat Apr 24, 2021 7:52 pm

It would seem that although you are married you do not live with your wife ie you believe you have separated from your wife. Even when you were both under the same roof you regarded yourselves as separated.

It is unclear what happened to your beneficial interest in the former marital home. You say you have taken cash for this interest but then say you and your wife own interests as tenants in common? Either you own 0% beneficially or you own some % ?

At the time you acquired you new home (ie at "completion") did you or did you not still own a % of the former marital home.

Note that you may have to remain on the "legal title" as there is a mortgage but this can still mean you own 0% beneficially.

chris_hart03
Posts:3
Joined:Sat Apr 24, 2021 11:40 am

Re: 2nd Property SDLT Refund and Divorce

Postby chris_hart03 » Sat Apr 24, 2021 8:36 pm

Hi
Sorry for the confusion. Hopefully the below helps

To move out of the marital home, I took money out of our joint back account. The amount I took was equivalent to my share of the equity in the marital home.

Therefore my wife and I understand that I have no equity in the home as I have ‘taken it’.. but there has been no change to the mortgage or deeds in relation to the marital home. Therefore When I completed on my new home, I legally owned a home (50/50) with my wife and therefore I paid the second property SDLT.

When we complete the divorce, I assume all this will be formalised such that I don’t own any of the marital home as I took money instead. Though I’m not entirely clear how I relinquish my ownership of the marital home this such that I can have the evidence to make a claim for a refund on my new home SDLT on the basis I no longer own a second home?

Whatever that process is.. can I do that while still being on the mortgage of the marital home?

Or is there something in between? Like I’m on the mortgage, and on the ‘deeds’ as an owner.. but I own 0%. Would that be sufficient to claim a refund though?

Sorry, very complicated. Hopefully the above makes sense

Thanks

maths
Posts:8281
Joined:Wed Aug 06, 2008 3:25 pm

Re: 2nd Property SDLT Refund and Divorce

Postby maths » Sun Apr 25, 2021 2:13 pm

1. It seems to me that you and your wife can be considered as "separated" en route, as it were, to full divorce.

2. You and your wife agreed that you would transfer your 50% in the marital home to her in exchange for a proportion of the monies in a joint bank account.
The 50% transferred was a beneficial (not legal) interest in the home.

3. The legal interest is required to remain in both your and your wife's names as you are both parties to the mortgage.

4. It is however possible to be a party to the legal title (which you are) but at the same time own 0% of the beneficial interest which arose following the agreed transfer in point 2 above.

5. It seems that despite this agreement the change in beneficial interests were not updated; this does not mean however that you did not transfer your 50% which prima facie you clearly did.

6. For SDLT purposes no charge arises on the transfer of your 50% to your wife in exchange for cash as the "exchange" is part of the dissolution or separation between the two of you (even though the home is mortgaged).

7. The issue re SDLT therefore relates to your own purchase.

8. On your purchase it seems that at the date of "completion" you did not in fact have any beneficial interest in any other property; by this time, your 50% in the marital home had already been transferred to your wife. Thus, the 3% charge would not apply to your purchase.

9. The issue seems to be one of evidence and practicality. The transfer of your 50% beneficial interest only requires to be evidenced in writing (and presumably although preferably at the time the agreement was made). Either your agreement was documented at the time or it was at that time a purely verbal agreement. Assuming the latter, then some form of document could now be prepared recounting the facts including the agreement to transfer your 50% as from the date it was agreed; the document would be dated today (ie cannot back date).

Once the above has been done then the 3% you paid could be reclaimed on the grounds of mistake by filing a new amended SDLT Return (ie you were under the impression at the time that it was payable on your purchase).

SDLT Geek
Posts:230
Joined:Sun Apr 30, 2017 5:45 pm

Re: 2nd Property SDLT Refund and Divorce

Postby SDLT Geek » Sun Apr 25, 2021 4:51 pm

I think it is helpful to add my contributions by putting notes after what maths has said.
1. It seems to me that you and your wife can be considered as "separated" en route, as it were, to full divorce.
I agree. That test needed to be satisfied as at the date of the recent purchase by Chris.
2. You and your wife agreed that you would transfer your 50% in the marital home to her in exchange for a proportion of the monies in a joint bank account. The 50% transferred was a beneficial (not legal) interest in the home.
A beneficial interest can only be transferred by a document in writing signed by the transfer. See Law of Property Act 1925 section 53 (1)(c). It is not enough to later evidence it in writing, the assignment itself must be in writing.
3. The legal interest is required to remain in both your and your wife's names as you are both parties to the mortgage.
Agreed
4. It is however possible to be a party to the legal title (which you are) but at the same time own 0% of the beneficial interest which arose following the agreed transfer in point 2 above.
Agreed, though formalities are required to transfer the share in the property.
5. It seems that despite this agreement the change in beneficial interests were not updated; this does not mean however that you did not transfer your 50% which prima facie you clearly did.
That depends on whether the formalities for the assignment of a beneficial interest were complied with by the time of the purchase of the new home. That seems a little unlikely. Because Chris remained liable on the mortgage, he might well have wanted to retain a share in the property so as not to be exposed to a debt without a corresponding asset.
6. For SDLT purposes no charge arises on the transfer of your 50% to your wife in exchange for cash as the "exchange" is part of the dissolution or separation between the two of you (even though the home is mortgaged).
That is right, if pursuant to an agreement in contemplation of divorce.
7. The issue re SDLT therefore relates to your own purchase.
Agreed.
8. On your purchase it seems that at the date of "completion" you did not in fact have any beneficial interest in any other property; by this time, your 50% in the marital home had already been transferred to your wife. Thus, the 3% charge would not apply to your purchase.
This depends on whether the formalities needed for a transfer of the beneficial interest were followed. It seems rather unlikely to me from what is said.
9. The issue seems to be one of evidence and practicality. The transfer of your 50% beneficial interest only requires to be evidenced in writing (and presumably although preferably at the time the agreement was made). Either your agreement was documented at the time or it was at that time a purely verbal agreement. Assuming the latter, then some form of document could now be prepared recounting the facts including the agreement to transfer your 50% as from the date it was agreed; the document would be dated today (ie cannot back date).
If the beneficial interest was transferred before the purchase of the new home, then all should be well and good. But the assignment needs to be made in writing, it is not enough to later evidence it in writing. Assuming Chris had successfully assigned his share and had no other property interests then the bare legal estate in the former matrimonial home would be worth under £40,000 and so Condition C would be failed. That would mean that the 3% surcharge was not due on the purchase.

But it is tougher if a beneficial share was still held on the date of the recent purchase. One of the conditions to later come within Condition D (the replacement exception) is that all of the interest, both legal and beneficial, in the old home is disposed of within three years. Chris seems unable to achieve this, because of the lender's requirements. So it would be difficult to qualify for a refund of the extra 3% SDLT by later divesting himself of his interests in the former matrimonial home.

chris_hart03
Posts:3
Joined:Sat Apr 24, 2021 11:40 am

Re: 2nd Property SDLT Refund and Divorce

Postby chris_hart03 » Sun May 02, 2021 11:37 am

Hi maths, SDLT Geek

Many thanks for the replies, i have been pondering for a few days about what they all mean :)

I think the only detail to add is that my wife and i do have an agreement in place. This was established when i took cash (actually obtained via a remortgage of marital home) in exchange for my interest in the marital home. This agreement was largely financial.. drafted by our solictors which detailed who was taking what money. It shows i took cash in exchange for interest in the marital home. It also has a number of protections for my wife.. such as she can sell home, she retains all proceeds, i have no right to possession etc. But appreciate this is just an agreement rather than anything formal with regards to property law etc.

I did call the SDLT helpline last week and explained the situation. After consulting colleagues, they couldnt really answer the question as they couldnt determine which criteria they would use when deciding if i owned two homes. They instead requested that i write to the "Technical Officer" at SDLT/HMRC Birmingham.

I have therefore prepared the below:
I am writing the regards to understanding whether I am eligible to claim a refund on higher rate Stamp Duty Lax Tax (SDLT) that I recently paid. This was paid when purchasing my new home (xxxxxxxxxxxxx) which completed on Xth December 2020. I was unsure as to whether I was required to pay due to a complex situation as I will attempt to explain below.
Since August 2020, my wife and I have been separating. The agreement my wife and I have is that I have taken cash from the relationship and my wife will entirely own the marital home. I hope the details below are relevant to explaining this agreement.

Re-mortgage of Marital Home
In September 2020, my wife and I split financially. As part of this, we re-mortgaged the marital home as the only possible route to obtaining sufficient money for myself to buy a new property and thus leave the relationship. The remortgage released 50% of the equity of which I took in its entirety. The remortgage was done as a joint mortgage. This is because my wife is a carer for our disabled son and would be unable to obtain a mortgage purely on her own income, and because I did not want my son to have to move home in what was already a difficult situation. I therefore remain in a joint mortgage with my wife on the marital home and will likely continue to be for as long as my son requires this.

Purchase of New Home
Using the equity released to me from the remortgage of the marital home, I purchased my new home. This is solely in my name. At the time of purchase (completed on Xth December 2020) I paid the higher rate of SDLT (3% of purchase price). This payment has unique reference xxxxxxxxx.

Ownership of Marital Home
As part of releasing the equity from the marital home in September 2020, and prior to the purchase of my new home, my wife and I have been progressing with divorce proceedings. To release the equity to myself, our solicitors have created and we have agreed a financial agreement. The relevant details of this agreement are that in exchange for myself taking all my interest out of the family home:
• My wife will have sole possession of the home, with the exclusion of myself
• My wife is responsible for all payments in relation the home (mortgage, insurance etc)
• My wife may sell the home, and all costs will be incurred by my wife
• All proceeds from the sale of the home will be paid exclusively to my wife
While I have written ‘my wife’ in the above, the financial agreement is perpetual, in that I will never have any claim over the ownership of the property. We have also changed from Joint Tenants to Tenants in Common. This ensures that in cases of my wifes death, I have no claim over the home and the home will transfer in accordance with her will.

Current Situation
At the present time, I currently hold a joint mortgage with my wife on the marital home. As described above, this was done to release equity and ensure my son could remain in his home. I am also listed on the Deeds of the property as I believe the mortgage requires this. I have however taken all interests from that property, such that my wife solely retains all interest in that property. The financial agreement we have in place states my wife is fully responsible for the mortgage payments and will retain all proceeds in the event of the sale of property.
The divorce is still in progress, in part due to long delays within the courts, though the hope is that this can be resolved in the coming months. However, while the divorce hasn’t been granted by the courts, the financial agreement set out above has been created by our solicitors and agreed.

Request
I would like to know whether given the above, you believe I am eligible to request a refund on the SDLT I paid on my new home. This would be on the basis I no longer own second home having released all interest in it as part of the financial agreement I have in place . I would be happy to provide any further information as required.
If you do not believe I am eligible, I would be keen to know more about which criteria I fail to meet as these may be resolvable?

Happy to take any critique on the above! Or indeed whether you think its a good idea to send it or instead get myself a tax/property expert.

Otherwise, i will feedback anything i hear back.

Thanks,
Chris

Taxninja
Posts:3
Joined:Thu May 27, 2021 4:15 pm

Re: 2nd Property SDLT Refund and Divorce

Postby Taxninja » Thu May 27, 2021 4:42 pm

If you look at SDLTM09820 it has provisions for seperated couples buyimg without partner. Conditions A and D are not met so therefore no Higher rates so many people miss this one


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