3% tax and intent at purchase

by Readers Question

14:34 PM, 24th April 2016
About 5 years ago

3% tax and intent at purchase

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3% tax and intent at purchase

We are in the following situation: Have a modest portfolio of BTL properties, but just sold the family home & living in rented accommodation. Was hoping to buy a large family home that we’d like to do a large extension on before moving in. Getting planning permission + architects + builders lined up will take at least a year. Was hoping to buy it on a BTL loan & let it for a year while this was sorted out & then change the loan to ordinary residential when the works start/ or when we move in. tax and intent at purchase

Will we have to pay the extra 3% as long as we move in within 36 months of selling the family home?

My reading of the new SDLT legislation ( https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/509184/GuidanceNote_Final.pdf.) is that it hinges on intention:

3.36 The test in respect of the new dwelling purchased is a question of *intention*, does the purchaser intend the dwelling to be his only or main residence? This is a question of intention at the time of purchase, what has the purchaser acquired the property for? The intention test will not only be met if there is an intent to immediately occupy, if some works are to be undertaken before occupation commences then this does not prevent the test from being met. If the dwelling is intended to be put to other uses, for example as a source of income, then the intention test will not be met. There may be rare cases of the purchaser’s genuine intention at the time of purchase being frustrated by events.

Our *intention* is clearly to make it a family home, but I worry that taking out a BTL loan on completion will be considired by HMRC to show a different intention, and that I will have to pay 3% and not get it back when I move in.

Does anyone have thoughts on this *intention test*? Is there a way of proving my true intentions if I take out a BTL loan at first?



p.s. I realise that getting a normal resi loan at completion & then taking out a BTL shortly thereafter might work, but that is not an easy route for us.


David Mensah

14:17 PM, 25th April 2016
About 5 years ago

great idea, should have done this first. -- am on now,

David Mensah

14:33 PM, 25th April 2016
About 5 years ago

Right, they have no guidance on that . I will need to write to the Birmingham Stamp office

HM Revenue and Customs – Birmingham Stamp Office
9th Floor, City Centre House
30 Union Street
B2 4AR
United Kingdom

will let you know what happens if they write back.

Steve Hards

15:16 PM, 30th April 2016
About 5 years ago

Isn't whether you are replacing your main residence or not a red herring? The flow chart makes no reference to what type of property you own or where it is located. If on purchase of a property - main residence or not - you own more than one, you pay the extra 3%, don't you?

David Mensah

15:57 PM, 4th May 2016
About 5 years ago

Hi Steve,

Thankfully, it is still the case that if you replace your main residence, you don't pay 3%, regardless of how many properties you own.

Where it gets more complex is
A) if you've already sold your main residence -- then you have 36 months to buy a new main residence without having to pay the tax. Leave it later, and you pay the 3%. People who can get caught out by this are e.g. those who go abroad for a period.

B) if you buy a new main residence, but haven't sold your main residence, then you have to pay the 3%, but will get it back if you sell your old main residence within 36 months.

C) situations like mine, where you are hoping to replace your main residence, but want to "bridge" the new main residence as a temporariy rental.


13:24 PM, 21st December 2020
About 4 months ago

Reply to the comment left by David Mensah at 04/05/2016 - 15:57
Hi David - apologies for jumping on an old thread here. I read this with interest however since I find myself in quite a similar position to that which you describe. I'm trying to replace my main residence (purchasing the new one before sale of old in order to beat stamp duty holiday) and possibly acquiring the new one with a BTL mortgage initially (and then remortgaging to a residential mortgage when actually occupying at a later date after sale of old one). I accept the 3% surcharge would be due on the new purchase, but question is whether this could be reclaimed given there may be a question over the 'intent' at the time of purchase for this to be my main residence?

I wonder if you got any further guidance from HMRC following your enquiries? Or indeed if you did go ahead with your plan and how that went?

Appreciate any thoughts / feedback.


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