SDLT and CGT potential faux pas?

by Readers Question

8:23 AM, 3rd January 2019
About 2 weeks ago

SDLT and CGT potential faux pas?

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SDLT and CGT potential faux pas?

Hi everyone, Thank you for adding me into this community. I really hope to be able to contribute going forward. First of all, I’d like some advice please. I bought a BTL property 5 years ago. I live in rented accommodation myself.

2 years ago, after the changes to the Stamp Duty rules, I bought a house for 55k ( it was very dilapidated ) wanting to move into it myself, after it being refurbished. During conveyancing, I quite truthfully stated that it was going to be my PPR, so my solicitor advised no stamp duty was to be paid. I recently read some articles though, and it has caused me to have doubts, that because I already owned a BTL, I should have indeed paid stamp duty?

As I’ve stated, the house was VERY dilapidated. I had some health problems that year, and the whole refurbishment just became too much for me. I never actually moved in and I decided to sell it a year later. I did make a small profit too.
Even if I was legitimately exempt from stamp duty, did I need to fill out some kind of form and do I need to fill out some kind of form for capital gains?

I have NO problem whatsoever substantiating my intention for it to be my PPR, should the need arise. Without going into personal details, the purchase/intention to use it as my PPR, was precipitated by my health problems. IE. I had no choice, but to move out of the rented accommodation I was in, and buy somewhere I could adapt for my life. I was late with my tax return that year, because of my illness, and HMRC were actually very understanding, and I avoided any penalties etc ( albeit, I did pay the tax itself in time )

Also, going forward. I really hope to buy a house as my PPR this year, or next. Same question again. Will I have to pay Stamp Duty? I still own just that one BTL.

Thank you so much in advance you good property peeps!

Fiona

Above Stamp Duty flow chart is accurate, but 18 month for a refund is now up to 3 years.



Comments

Neil Patterson

8:40 AM, 3rd January 2019
About 2 weeks ago

Dear Fiona,

Please see the above Stamp Duty flow chart I have added for you.

Unfortunately unless you are replacing your main residence with a new main residence and selling the old one you are liable for the additional Stamp Duty Surcharge of 3%. In this case £1650. Please see HMRC Stamp Duty Calculator >> https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro

Answer to the second question is the same you would still pay the additional second property surcharge for Stamp Duty.

You will also need to check if you have a CGT liability on the sold property as there will be no PPR relief.

HMRC CGT calculator >> https://www.gov.uk/tax-sell-property/work-out-your-gain

See below annual CGT allowance depending on tax year >> https://www.gov.uk/guidance/capital-gains-tax-rates-and-allowances

AEA limits

You can use your AEA against the gains charged at the highest rates to reduce the amount of tax you owe.
Customer group 2014 to 2015 2015 to 2016 2016 to 2017 2017 to 2018 2018 to 2019
Individuals, personal representatives and trustees for disabled people £11,000 £11,100 £11,100 £11,300 £11,700

I would personally make sure you get a good accountant experienced in property to help you with this and your tax returns going forward.

Fiona

8:44 AM, 3rd January 2019
About 2 weeks ago

Oh dear.
Thank you for the response. Looks like I will have to get in touch with HMRC. I was quite transparent with my solicitor regarding this, and relied upon their judgement. Good job it was such a cheap house !
Thank you again !

Sarah Jayne Pajger

9:10 AM, 3rd January 2019
About 2 weeks ago

Reply to the comment left by Neil Patterson at 03/01/2019 - 08:40
I’m purchasing a new property to be my home and was thinking of renting out my existing home. According to the flow chart I would would need to pay 3% stamp duty on my existing home on the original purchase price (£260k) and not the current value (£500k) ?

Neil Patterson

9:56 AM, 3rd January 2019
About 2 weeks ago

No incorrect you would pay the 3% surcharge on the new purchase sorry.

silversurfer2017

10:30 AM, 3rd January 2019
About 2 weeks ago

Reply to the comment left by Sarah Jayne Pajger at 03/01/2019 - 09:10
I am not an expert but think the following is correct:
You could sell your existing private residence within 3 years of completing the purchase of your new property. You would then nominate you new property as your main residential property and you should be able to claim back the extra 3% SDLT. You may wish to reconsider how long you want to rent out your previous home before you sell it, bearing in mind that the net rental income will be subject to income tax but the 3% SDLT refund will be tax free!

Fiona

11:30 AM, 3rd January 2019
About 2 weeks ago

Hi again,
Neil, your flowchart is fab ! Having done a bit more reading, I think I might be ok. I separated from my ex-husband in 2012. We divorced in 2014, and whilst he remains in our marital home, he bought me out of it finally in 2015. Which is to all intents and purposes a "sale" / disposal. I bought this house in Dec 16, which counts as replacing my previous PPR.
And whilst I ultimately ended up selling this house, and not moving in, I did live there for a short while before the real refurb work started.
In terms of now moving forward.
As I now understand, I sold this last house in Feb 2018, and I have 3 years from that date, to buy myself another PPR, to be exempt from the surcharges on Stamp Duty.
I intend however, to crystallise all these facts somehow, so it doesn't trip me up in the future. Going back to my initial question ? Is there some kind of exemption form that my solicitor should have advised me to fill out at the time of purchase ?
All this strikes me as being very confusing sometimes, and given all I've read this morning, other people, experts and solicitors, and accountants included, also find it complicated !
Thank you !
Fiona

Fiona

16:16 PM, 3rd January 2019
About 2 weeks ago

I have compiled a letter to HMRC, with a timeline of events/purchases etc. I will certainly post an update here, as to what their response is.
Many many thanks for the flow chart Neil.
😉

Fiona

12:47 PM, 4th January 2019
About 2 weeks ago

I compiled my letter, but forwarded it to an SDLT expert for "four eyes" first. Just had a phone call from them, confirming I'm ok. Phew !
They also advised me that I don't need to send the letter.
I'm hoping to buy another PPR this year, at which point, I can engage their services formally, and they will write me a letter of advice for my solicitor, to crystallise my position, and pay the correct standard SDLT, not the enhanced rates. Yay ! Again, thank you for your responses. 😉


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