Second property Stamp duty Just because we live together?

Hi David,

From the .Gov site >> 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

It looks like your solicitor is correct.

Married couples and civil partners

Married couples and civil partners who own one property at the end of the day of a transaction will not pay the higher rates of SDLT. However, if either of them owns more than one residential property they may pay the higher rates when purchasing another property.

The government will treat married couples and civil partners living together as one unit. This is consistent with other areas of the tax system including Capital Gains Tax private residence relief where married couples are entitled to relief on one residence between them.

This means that:

married couples and civil partners may own one main residence between them at any one time for the purposes of the higher rates
property owned by either partner (and any minor children) will be relevant when determining if an additional property is being purchased or not. Therefore, an individual buying a property may be liable for the higher rates if his or her spouse or civil partner has an existing residential property. If the spouse or civil partner then sells that residential property they may be able to claim a refund

Married couples and civil partners are treated as living together, and therefore as one unit, unless they are separated:

under a court order; or
by a formal Deed of Separation executed under seal.

In each case the marriage or civil partnership must have broken down. Where a married couple or civil partners sometimes live apart (but the relationship has not broken down), which property is the couple’s main residence will need to be determined by the facts (more detail is available in section 2.8).

Example 13:

Mr and Mrs I own a main residence together. They decide to purchase a second home jointly. At the end of the day of the transaction they own more than one residential property and are not replacing their main residence, so the higher rates will apply.
Example 14:

Mr and Mrs L own two residential properties jointly. Although they spend time in both, only one of these properties is their main residence. If they sell the residential property that is their main residence and purchase a new main residence, they will not pay the higher rates, as at the end of the day of the transaction they own two properties but are replacing their main residence.

However, if they sell the property that is not their main residence, their second home, and purchase another second home, they will pay the higher rates, as at the end of the day of the transaction they own two residential properties and have not replaced their main residence.
Example 15:

Mr and Mrs M are married. Mr M owns a home (which he purchased on his own before he was married) where the couple live as their main residence. Mrs M then buys a property to be rented out. At the end of the day of the transaction they own more than one residential property and are not replacing their main residence, so the higher rates will apply.
Example 16:

Mr A marries Mr B. They each own a property (which they purchased individually before they were married and used as their respective main homes). Mr B then sells his former main home and purchases a new property to rent out.

At the end of the day of the transaction Mr A and Mr B own more than one residential property and are not replacing their main residence, so the higher rates will apply.
Example 17:

Ms C and Ms D are in a civil partnership. Ms C owns a property (which she purchased on her own before her civil partnership) where they live together as their main residence. However, Ms C and Ms D decide to separate. After they have separated under a court order, Ms D decides to purchase a property.

At the end of the day of the transaction Ms D owns one residential property, so the higher rates will not apply.

I bet the accountants who have to sort out this mess are rubbing their wallets with glee.
Neil an explanation of why cohabiting couple cannot own more than one property without penalty but are not recognised for capital transfer tax purposes, would be helpful.

Hi David,

I am afraid I am at a loss to explain many recent Government tax decisions and I expect even they find it difficult!

I am not married though Neil though I will be latter this year.
I am advised cohabiting means my partner has to pay stamp duty though she owns no share of any property at present.
I cannot find any reference to this on the flowchart.

Hi David,

It is on the link to the .Gov site I quoted, and I copied the relevant section.

The flow chart doesn’t cover this area as I suspect it would be too complicated to understand if it did.

Please don’t shoot the messenger lol

Surely cohabiting as “partners” is quite different from a formal civil partnership, which is a form of legally-sanctioned relationship designed for gay people and is equivalent to marriage? The way I read the legislation and the examples, you are only affected by the increased stamp duty tax if you are in a *formal* partnership as defined by the State, but not if you are just cohabiting.

So surely David and his girlfriend are in the clear here? And even if they are cohabiting and planning to marry later, this situation could change. To play devil’s advocate, what is there to stop them from ceasing to live together for a temporary period? The girlfriend could “move out” by removing her name from all bills, council tax, electoral register, GP service etc at their current address, and move in with, say, her parents or a nearby friend, registering with a GP, the electoral roll and so on at the new location.You would argue that the relationship has temporarily broken down and you are separating for a period, although your partner continued to work for her current employer (if any). Of course she is fully entitled to visit David and stay overnight from time to time, as they try to repair the relationship.

Your partner then buys a property, paying the standard rate of stamp duty. Then, thank goodness, after the sale completes, the couple repair their relationship and the marriage is back on. How is HMRC going to know any different? I think this is why the legislation only penalises married couples and civil partners, but makes no reference to cohabitees.

I’m not sure the answer given is correct, the original post does not seem to be married or in a civil partnership (yet) – so surely he is correct in saying that his girlfriend, who does not own a property, can buy a property without paying the extra stamp duty. The examples given only cover married couples of civil partnership couples – is how I read it!

Reply to the comment left by “Neil Patterson” at “20/05/2016 – 14:35“:

Neil I was not really seeking an answer, for like Barristers I never ask a question to which I do not already know the answer, merely attempting to highlight government inconsistencies.

Ah yes I got mixed up with what a civil partnership was so on second thoughts I have the correct section but still none the wiser. Doh !

Reply to the comment left by “Tony Atkins” at “20/05/2016 – 15:08“:

Hi Tony, sounds like a plan but I was not sure my solicitor was correct hence why I am seeking clarification.
Everything that I had previously read referred to married and civil partners .