Stamp Duty extra 3% – Do I pay flow chart

by Readers Question

8:41 AM, 25th February 2016
About 3 years ago

Stamp Duty extra 3% – Do I pay flow chart

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Stamp Duty extra 3% – Do I pay flow chart

Myself and my fiancee rent in London and due to the astronomical property prices here, we decided in Dec 2014 to purchase a buy-to-let residential investment in Northern Ireland. It completed in April 2015.

We’re now in the process of buying our first residential home together in NI also with a view of moving back to NI towards the end of the year.

We have never lived in or owned our own home.

Our mortgage broker had previously advised us that we’d be exempt from the 3% “second home” stamp duty surcharge but now he’s not so sure.

Can anyone clarify?

Barry

Editors Note: Stamp duty guide flow chart below

Stamp



Comments

Neil Patterson

8:50 AM, 25th February 2016
About 3 years ago

See the full Gov document here > 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

A summary of who pays what and when can be seen in the flow chart above.

The most recent updates in the discussion document include;

if you ‘already own a property, you will pay the higher rate on your new residential home unless you sell the existing property.

Adrian Jones

14:25 PM, 25th February 2016
About 3 years ago

I think I'd be looking for a new mortgage broker.

Chris Clare

14:35 PM, 25th February 2016
About 3 years ago

To be fair to your mortgage broker there has been some confusion for clients with a buy to let who go onto buy their first home.

That said they do appear to be wrong and the higher SDLT will be due I am afraid.

However it has not been confirmed as yet that this higher rate will come in to force, we will not know for certain till the March budget. While it does look like a certainty we can always hope they will see sense, so fingers crossed.

Onslow Clough

9:27 AM, 28th February 2016
About 3 years ago

Reply to the comment left by "Neil Patterson" at "25/02/2016 - 08:50":

Neil, I am in rented property so I have nothing to sell but I do have other BTL properties. If I want to now buy a house for myself to live in do you think would i pay the higher rate? It isn't clear in the flow chart.

Chris Clare

9:02 AM, 29th February 2016
About 3 years ago

Reply to the comment left by "Onslow Clough" at "28/02/2016 - 09:27":

I agree with you Onslow it is not clear from the flow chart.

As you live in a rented property this purchase will replace your main residence so in sensible theory this would not be subject to the higher rate of SDLT.

However I have seen this situation and the guidance I have been getting is it does not apply to rented property only owner occupied property. Therefore you will be subject to the higher SDLT rate as this is deemed to not be replacing your main residence.

The fact is I think we will have to wait for the budget so we can get a proper handle on the rules that will be applied, as I for one would be appealing a situation such as yours under the rules.

Once the budget has taken place we will be able to ring HMRC and get proper guidance from then but we cannot at this time as it is currently not law.

9:12 AM, 29th February 2016
About 3 years ago

I agree with Neil....I think it's pretty clear that you will be paying the extra surcharge. In my mind moving from rented to owned does not constitute replacing your primary residence. Think about it.....if it were allowed.. .people could move out of a property they own into rented.... ....convert the vacated property they vacated into into a buy to let.....and then say after 3 months buy a new residential. This would allow the building of a buy to let portfolio sdt free by stealth.

Chris Clare

9:27 AM, 29th February 2016
About 3 years ago

I agree with the need to block abuse of the system but surely the definition of a primary place of residence is not ownership.

If I have lived in a rented property for years for any sane requirement that is my primary place of residence, surely.

Barry McGee

9:28 AM, 29th February 2016
About 3 years ago

Thanks to everyone for taking the time to reply to my question. It would seem bar a sea change on March 16, we'll be forced to cough up.

Chris Clare said - "...as I for one would be appealing a situation such as yours under the rules."

Is it possible to appeal individual cases then?

Chris Clare

9:36 AM, 29th February 2016
About 3 years ago

In short no, however there is nothing stopping someone arguing the rules if there is sufficient ambiguity. Tax avoidance is all about finding grey area in the tax legislation.

For example: If they do not define Primary Place of Residence (PPR) I would not pay the increased duty and state that the rented property was my PPR. They would be forced to define what a PPR is.

I wouldn't hold my breath as I am sure they will define it when they pass the appropriate tax law to collect, but you never know.

Ramus Wood

10:41 AM, 29th February 2016
About 3 years ago

They are very likely to just link it to the definition of PPR for CGT purposes. A rented property where you live - no matter how long - clearly does not qualify, so if you have a BTL any other property you buy will be caught.

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