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Where Taxpayers and Advisers Meet

SDLT question re: additional rate

Yat182
Posts:6
Joined:Mon Apr 26, 2021 11:26 am
SDLT question re: additional rate

Postby Yat182 » Tue May 04, 2021 1:40 pm

Hi All,

Hoping someone can please help here:


I live in Property A (my main home)
I also own Property B

I want to sell Property B, let Property A, and buy a new main home to live in - Property C

My understanding is I will have to pay the surcharge of 3% here when buying property C - that is clear.

What if I move in to Property B for 6 months - make that my main home - and then sell it and buy Property C. Will that allow me to avoid / get a refund on the additional rate of SDLT as I am moving from "main residence" to "main residence"?


Many thanks in advance.

someone
Posts:478
Joined:Mon Feb 13, 2017 10:09 am

Re: SDLT question re: additional rate

Postby someone » Wed May 05, 2021 7:39 am

In order to qualify as a main home you have to live in it with some intention of permanence.

There are cases where people have lived in a property for days and qualified for PPR (I think there was a case where someone bought a house and moved in with the expectation of being married, that then collapsed and he moved again and qualified for PPR) but there are also cases where people have "lived" somewhere for long periods but the courts have ruled that it didn't count for PPR because they never had the intention of it being permanent.

The longer you live there before you put it on the market the better your chances of qualifying for main home replacement. Also if you let your current home before starting to market property B then that's another bit of evidence that it really is your main home.

There is no hard and fast rule unfortunately. I belive this is one of the cases where you can ask HMRC for "pre-clearance" to confirm whether you qualify for the main home replacement exemption.

Meta thought:
1. Assume you let property A and move into property B.
2. assume you cannot afford to buy property C unless you qualify for the main home replacement exemption.

If HMRC allow main home replacement exemption it then all well and good.
If HMRC don't allow the main home replacement exemption then you cannot move and property B becomes your permanent main home - and therefore you qualify for main home replacement. :-)

I am neither an accountant nor a lawyer.

Yat182
Posts:6
Joined:Mon Apr 26, 2021 11:26 am

Re: SDLT question re: additional rate

Postby Yat182 » Wed May 05, 2021 11:27 am

Thanks so much - that does clarify a lot.

When you mention that "In order to qualify as a main home you have to live in it with some intention of permanence.

There are cases where people have lived in a property for days and qualified for PPR"

I mean, with regards to Registered Voting address, all bills, etc, how does one show "intention of permanance"? I see what you mean about letting Property A for a period of time; but is there much more I can do?


Many thanks

someone
Posts:478
Joined:Mon Feb 13, 2017 10:09 am

Re: SDLT question re: additional rate

Postby someone » Wed May 05, 2021 12:03 pm

There's no easy way to prove it.

All that is strictly required is that when you move in you have no plans to move out.

At the end of the day it's convincing HMRC (or the courts if you take it to tribunal) that at the time you moved in you didn't already have plans to move out again that matters.

So one day could be sufficient if, for example, you won the lottery the day after moving in and then went and bought a huge house and reclaimed the 3% charge when you sold the one you'd only lived in for a few days. You could (probably) successfully argue that the change in circumstance changed your plans.

On the other hand, if you put your property on the market before you move in and it then takes six years to sell, HMRC could try to argue that it was never your main home for SDLT even though you lived there for six years!

If your intention is to sell property B as soon as you qualify for SDLT relief then it's arguable that you will never qualify.

But if the time between moving in and marketing for sale is "long enough" then HMRC are unlikely to query it. How long is "long enough" is impossible to know. I'd be surprised if HMRC queried it if it had been your home for 2 years and you had no other residences before you started marketing for sale. I'd guess that the cases they look the most closely at are those where people have multiple residences and "coincidentally" happen to be selling the main one and so get higher rate SDLT relief. But that's just a guess based on what I'd be suspicious of.

Yat182
Posts:6
Joined:Mon Apr 26, 2021 11:26 am

Re: SDLT question re: additional rate

Postby Yat182 » Wed May 05, 2021 12:11 pm

Thanks so much.

To be honest, I think it may just be worth it to bite the bullet and pay the excess SDLT as I'd really hate to go through a lot of this only for the courts to decide otherwise - plus no accounting for stresses / sleepless nights etc while HMRC investigate.

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

Re: SDLT question re: additional rate

Postby Taxninja » Thu May 27, 2021 4:36 pm

there are considerations to think about in what is considered as your main residence. look at SDLTM09812. Not exhaustive and no concrete definitions, but there never is with self assessed tax


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