Stamp duty liability on primary residence for unmarried couple about to separate

by Readers Question

11:35 AM, 22nd June 2017
About A year ago

Stamp duty liability on primary residence for unmarried couple about to separate

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Stamp duty liability on primary residence for unmarried couple about to separate

I am a landlord and I have been living with my partner in the same jointly owned property for 13 years. We are now separating and she is happy for me to take over the property as I have been paying for it for the past 13 years anyway.

My current mortgage lender has done the affordability assessment as that has all been approved so we thought it was a case of instructing a solicitor and moving forward. However, it has been brought to my attention that because I also have a rental property and we were not married that I may have to have to pay stamp duty on my home again that I bought 13 years ago and paid stamp duty on it at the time and furthermore but I may also have to pay the 3% surcharge because at the point of taking over the property this will not be my only property (despite it been my only home for 13+ years). This doesn’t seem right????

It was suggested that if I were married, this second-time-around stamp duty wouldn’t have applied and if I was in a same-sex relationship and had entered into a civil partnership it also would also not be liable to stamp duty a second time.

This all seems very discriminatory against unmarried opposite-sex couples. I was also advised that any money transferred as part of the settlement will also be liable to stamp duty. Can anyone shed any light on this either from knowledge or experience perspective?

Russell



Comments

Neil Patterson

11:42 AM, 22nd June 2017
About A year ago

Hi Russell,

I have helped answer many questions on this subject but you have me stumped in this scenario.

It does not seem correct as you suggest so I would recommend you contact HMRC to get it clarified.

From .Gov examples >> 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

"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."

Bill O'Dell

8:22 AM, 23rd June 2017
About A year ago

It seems as though this separation is amicable, so would the other party sign a Deed of Trust that all the proceeds revert to the other on sale of the property? This way no transfer of ownership is required?

Lyndon Whitehouse

13:42 PM, 24th June 2017
About A year ago

I have very recently done two transfers of equity whereby properties that were jointly owned on mortgages by my wife and I were transferred to my daughter and I. I.e. My wife's share was transferred to my daughter and no money changed hands. NO SDLT
I'm just doing a third one with my younger daughter.

Puzzler

15:57 PM, 24th June 2017
About A year ago

SDLT is only payable on the "consideration" which would be the amount you pay your ex to buy out her share and the value of her share of the mortgage.


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