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Where Taxpayers and Advisers Meet

Will I have to pay both CGT and 2nd home stamp duty?

jack2018
Posts: 1
Joined: Mon Dec 10, 2018 11:37 am

Will I have to pay both CGT and 2nd home stamp duty?

Postby jack2018 » Mon Dec 10, 2018 12:18 pm

This is going to read like an exam question...

Husband and I jointly own and live in two adjacent terraced houses (House A and House B). No mortgage on either house. Although we live in both of them at the same time, and all the time, I am pretty sure only one of them can be our PPR (two separate dwellings on Land Registry, two separate postal addresses etc). Each house has been valued at about 250,000.

We now want to sell one of them, to buy a house in a different area (House C, partial move now and eventual retirement home) for about 300,000. House C would be our PPR.

House A we have owned for 30 years, and is our PPR (registered to vote there, our address with HMRC, etc). House B we have owned for only about 8 years.

If we sell House A (the PPR), keep House B and buy House C: we don't pay CGT on House A but do pay 2nd home stamp duty on new House C. Is that right? But House C is going to be our PPR, so maybe I'm wrong about the 2nd home stamp duty?

If we sell House B, keep House A (the current PPR) and buy House C: we pay BOTH CGT on House B AND 2nd home stamp duty on House C (or not?, see previous query).

It just seems that during this process, we're not allowed to have a PPR!

If we put House A into Husband's sole name, and House B into my sole name, does it work better? House A is the PPR, sold with no CGT; all the money from the sale belongs solely to Husband; he does not own another property (House B being in my name) so can buy House C in his name only without paying 2nd home stamp duty. Is that right?

But I would be really uneasy about not being the joint owner of the family home (new House C) in the long term (what if disaster strikes? I have no income). So, after Husband buys House C in his sole name without 2nd home stamp duty, can he then transfer the ownership to our joint names without having to pay any extra stamp duty? House C would automatically have become my PPR as soon as he bought it, as we're married.

I'd pay CGT on House B sometime in the future (at least 10 years time) when we sell it. Can I avoid some of that CGT by swapping our "nomination" between new House C and House B at some point in the future?

Any advice most gratefully received - I am perfectly happy that we (or I) will be paying CGT at some point, but am puzzled that we may have to pay 2nd home stamp duty for a change of PPR.

AGoodman
Posts: 770
Joined: Fri May 16, 2014 3:47 pm

Re: Will I have to pay both CGT and 2nd home stamp duty?

Postby AGoodman » Tue Dec 11, 2018 11:40 am

Option 1 should not result in CGT or additional rate SDLT as you are replacing your main home

bd6759
Posts: 3069
Joined: Sat Feb 01, 2014 3:26 pm

Re: Will I have to pay both CGT and 2nd home stamp duty?

Postby bd6759 » Wed Dec 12, 2018 12:33 am

Option 1 should not result in CGT or additional rate SDLT as you are replacing your main home
According to the question, they will only "partially" move in. HMRC might need persuading that they are changing PPR, so HRAD may apply.

someone
Posts: 360
Joined: Mon Feb 13, 2017 10:09 am

Re: Will I have to pay both CGT and 2nd home stamp duty?

Postby someone » Sat Dec 15, 2018 1:07 pm

My understanding is that this is a bit of a minefield - my wife and I are in a similar situation in having our "home" split across two flats so I have done a bit of research on this. (Note that all of this assumes that both are "residences." If only one is "livable in - e.g. you have removed the kitchen in one of them to make an extra bedroom then it probably means that that property isn't a residence)

The first thing to realize is that CGT and SDLT rules aren't the same so you need to consider each separately. But if you have NOT made an election for CGT purposes then the rules become very similar.

Firstly CGT if you have made an election - then the CGT is calculated "normally" where you apportion PPR according to the election(s) you have made. If you are selling the one that isn't your PPR (according to your election) then you should elect to make it your PPR as then you get the last 18 (I think - it's changing) months as PPR too even if your election is just for one day. (If it's already been your PPR at some point then you get these 18 months already and no need to make an election)

If you have NOT made an election (and your residences have not changed in the last two years then your PPR is decided "on the facts" - see SDLT below)

(Incidentally, this is why if you have two residences you should always make a CGT election even if the default "on the facts" would give the same results as once you've made one you have the option to change it)

SDLT - this is decided "on the facts" and is independent of any CGT election you might have made. One of the two properties is your PPR for SDLT purposes and you must (somehow) determine which one it is. There's no hard and fast rule - but if you usually sleep and cook in one of them then that's probably your PPR for SDLT purposes.

If the one of the two properties that you are selling is your PPR (on the facts) and the property that you are buying will be your new PPR (on the facts) then you will not be liable to the higher rate of SDLT. Ironically, when you buy your new PPR you could elect to make your other property your PPR for CGT purposes and not affect this (which might make sense if you intend to sell it)


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