My letter and response for huge blow to investors buying their main residence!

by Readers Question

9:35 AM, 9th March 2016
About 3 years ago

My letter and response for huge blow to investors buying their main residence!

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My letter and response for huge blow to investors buying their main residence!

Dear Mrs H…punch

The Government has recently consulted on the higher rates of stamp duty land tax for purchases of additional residential property. The consultation can be found at https://www.gov.uk/government/consultations/consultation-on-higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties/higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties and contains examples of how the higher rates apply in different cases, which you should find useful. The Government is now carefully analysing the consultation responses received. The final policy design will be confirmed by the Government at Budget on 16 March 2016, before the new rules come into effect on 1 April this year.

In the circumstances you describe the proposal is that the higher rates will apply as following the purchase you will own more than one residential property and will not have replaced a main residence. i.e. sold a current main residence (that you own) at the same time as buying a new one. As you are renting your current main residence and do not own it the replacement rules will not apply – see section 2.2, 2.4 and 2.8 of the consultation document for further details. There are special provisions if the new main residence is purchased with 18 months of the sale of the old one but unfortunately under the proposals these will not apply because you sold your old main residence 6 years ago.

Yours sincerely

Stamp Taxes Policy & Technical Team
——————————–
This is my original email to stamptaxes.budget&financebill@hmrc.gsi.gov.uk

Dear sir or madam,
Please could you help with an enquiry that we have regarding how much stamp duty we will pay if we purchase our own home.
HMRC gave us this email and said we should ask you for advice.

Our situation is complicated and none of the current published documentation or examples covers our situation so we need clear guidance before we proceed with the sale as we can’t afford to buy if an additional 3% is added.

My husband and I are property investors!
We own 17 small ex local authority buy to let houses that we purchased over the last 10 years.
We have never lived in any of them, they were always purchased as buy to let and all have buy to let mortgages on them. They are in a different area to where we live now and used to live.

With regards to our own property, we owned our own residential property 6 years ago in Solihull, but due to a forced relocation with work we moved 125 miles away to Merseyside and moved into a rented property. We sold our residential property at the time so do not have one to ‘sell’ anymore.
We chose not to buy again immediately as I needed to be flexible with work as there were further possibilities of relocations.
After 6 years of renting and I now have a new job, we feel secure so have decided to buy the rented house we currently live in.
The owner investor needs to sell because of the new tax changes to landlords.
Unfortunately it is likely that we will be completing after the April deadline.

All of the current published documentation does not give clear guidance on our situation.
We assumed that although we had other BTL properties, as this is our only residential property we wouldn’t incur the additional 3% but in the diagram this is only the case if we are selling our old property, which we have already done.
There is no mention of current property investors who rent then buy their own home.
However there is talk of people moving out of their own home into rented, renting that out then buying again which is not what we have done.

We have 2 small children settled in the school locally so we don’t want to have to move away.
But if we have to pay the 3% extra we can’t afford to buy this house and the landlord will sell to somebody else making us homeless.
We understand that these changes are there to help people purchase their homes which we are so we really hope this is a positive outcome for us.

Please can you confirm if we will be exempt from the additional 3% as this is our only residential property and we have already sold our last residential one before moving into this house and renting it 6 years ago. All of our deeds, council tax and mortgage information will show this.

We really look forward to hearing from you
Kind regards

Shirleyann

Editors Note: Stamp duty diagram below

Stamp



Comments

Max Wilde

12:51 PM, 9th March 2016
About 3 years ago

This is outrageous, it really is.

you should never have to pay the inflated SDLT rate on our personal residence, regardless of weather or not you already own one, thats not what the new SDLT is for!

also, its unfair on partners of people in property, who are not involved with the business, but are buying a residence togeather, that they are dragged into it and will have to pay the higher SDLT too

Monty Bodkin

15:55 PM, 9th March 2016
About 3 years ago

Would the 15+ properties exemption apply in your situation?

Mark Evans

21:36 PM, 9th March 2016
About 3 years ago

Having always had some interest in politics but never been strongly in favour of one party over another, it's policies like this and many others that will for the first time encourage me to protest vote against the Conservative Party during the next General Elections.

How sad that the very first time I will vote will be to vote the government out and not select a party for it's merits.

Puzzler

22:30 PM, 9th March 2016
About 3 years ago

You can always have a PPR. One of your properties should be nominated as such. To say you lose that because you sold six years ago is nonsense. When did you make your last purchase? There is a two year period in which you can nominate a PPR. Unless that has changed....

S H

7:48 AM, 10th March 2016
About 3 years ago

Reply to the comment left by "Monty Bodkin" at "09/03/2016 - 15:55":

Apparently they are reviewing the '15 property rule' they said it's likely it won't be included and I will have to wait till 16th to read the full guidance

S H

7:53 AM, 10th March 2016
About 3 years ago

Reply to the comment left by "Puzzler " at "09/03/2016 - 22:30":

We have a buy to let coming empty soon so we are thinking of moving into that temporarily while keeping this rental close to the boys school, then selling it before buying this house. Bit of a polava but will be good for capital gains so by screwing us on one tax system we are forced into this and will end up save money on another.

Hazel de Kloe

10:20 AM, 10th March 2016
About 3 years ago

That's shocking!! I wasn't aware that there were complications around SDLT from the whole PPR side of things if you were buying a property as a PPR from rented accommodation.

I believe the 15 property 'possible exemption' may be only when you are buying 15 in one go, not if you already own 15 or more.

Good luck with working out the best way round Shirleyann, as it sounds like you now have...

Rob Crawford

11:45 AM, 10th March 2016
About 3 years ago

Unfortunately the answer was predictable! Very unfortunate. I would certainly look at the 15 plus exemption rule though, as suggested by Monty.

matchmade

14:11 PM, 10th March 2016
About 3 years ago

Unless the 15-property exemption applies in your case, I would do the following:

1. When your BTL becomes empty, send a letter to your tax office stating that you own multiple properties and wish to nominate the empty one as your Principal Private Residence. Back-date this nomination for two years (the maximum allowed) from the date your tenant moves out. This will mean the BTL house will have already qualified for two years as your PPR for tax purposes.

2. Establish residency in this property: move your bank accounts and credit cards to that address, register with a GP, get your name on the council tax and electoral rolls. Ideally you would also literally live there, so the neighbours recognise you and can attest that you were in fact resident. Whatever used to be the practice when MPs were "flipping" their residencies to avoid capital gains tax, HMRC are now very hot on private individuals proving that their PPR occupancy was a *fact*, not just a nomination. If you just nominate the BTL property as your PPR, but actually continue to live elsewhere, your nomination may later be denied by HMRC.

3. Live in the house for at least six months, or preferably a year, or until such time as you can justifiably argue that you saw "the house of your dreams" and decided to move to a new PPR.

4. Sell the old BTL property - this is crucial - and then buy your new PPR within 18 months. Your capital gains tax bill will be reduced on the BTL property because you have established it as your PPR for around 3 years, and as you have established your PPR at the BTL address, you won't have to pay extra 3% stamp duty on your new home.

However, speaking frankly, is it really worth all this faffing around, just to avoid 3% in stamp duty?

S H

18:44 PM, 10th March 2016
About 3 years ago

today I received a phone call from Alan Ward chairman of RLA about this situation. He has referred this case to a PR consultant who has asked if I will do an article in the Telegraph. I would be more than happy to pay 3% more on a future BTL but resent it in this case as its my only private residence. I'm pulling out all the stops to complete before the 1st April but it's extremely frustrating that we won't know what details are in the policy until 16th then it's implemented 2 weeks later.

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