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

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

9:35 AM, 9th March 2016, About 6 years ago 18

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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

by S H

19:01 PM, 10th March 2016, About 6 years ago

Reply to the comment left by "Tony Atkins" at "10/03/2016 - 14:11":

You are right Tony, it's far too much hassle doing that, the seller wants to sell now so will look for another buyer if it takes us 6 months.

by

21:13 PM, 10th March 2016, About 6 years ago

Also....j doubt very much the 15 property rule would apply to a purchase of a residential property....as it'sit's not an asset being acquired in the pursuit of business activities.

by

21:19 PM, 10th March 2016, About 6 years ago

Can you not squeeze a bit of equity out of one of your existing btl? Got to be less hassle than have to deal with 2 moves.

by David Mensah

7:15 AM, 15th March 2016, About 6 years ago

Reply to the comment left by "Tony Atkins" at "10/03/2016 - 14:11":

Hi Tony,

A question about point 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"

Do I understand this right, even though the previous tenants would have only moved out say 1 April 2016, one could still back-date this nomination for two years, to 1 Arpil 2014?

by matchmade

16:57 PM, 15th March 2016, About 6 years ago

Reply to the comment left by "David Mensah" at "15/03/2016 - 07:15":

Hi David, I believe this is correct. The situation is that you are only allowed one PPR at any one time, and you are allowed to "elect" which property that is if you own more than one, by writing to the HMRC. In addition, it is possible to be absent from a PPR for, say, reasons of work, provided that you later move back into the property at a later date. Therefore in this situation, Shirley Ann might have decided to move into the former rental property after the tenant moved out, thereby establishing a fact of residency, and she could also tell HMRC "I own several properties, but I elect Address X to have been my PPR for the last two years." The fact that Address X was in fact occupied by a tenant ought to be irrelevant, provided she eventually does move into the property at some point afterwards.

Of course there are additional complications around the status of the mortgage - residential or BTL - but in principle it's perfectly possible for you to buy a property in March 2014 with a BTL loan, elect it as your PPR since March 2014 as late as March 2016, rent it out for two years without ever living in it from March 2014- March 2016, then re-mortgage with a residential loan and move into the house in March 2016 to establish it as your PPR. Or you could take out a residential loan from the start and ask permission from the lender to rent it out for two years, then move in. The upshot is that the mortgage company is kept happy and you have elected two years of PPR status for the house before you actually move in, so all price increases will be free of capital gains.

by Hazel de Kloe

18:38 PM, 15th March 2016, About 6 years ago

Sounds like a plan...

by Hazel de Kloe

19:31 PM, 24th March 2016, About 6 years ago

On another note, I have just been working with a set of clients who are married. Their intention was for the husband to purchase a property using his first time buyer status (and just in his own name), then to look into the wife buying one at a later point using her first time buyer status.

I suggested to look into the new stamp duty implications and it appears that by association of marriage (even though on the first property neither the property nor the mortgage are in her name), that the additional 3% would still apply for the wife's purchase!

Seems that they'll catch you out whichever way you try...

by DanielLatto

11:00 AM, 3rd March 2017, About 5 years ago

Just another kick for property investors really 🙁


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