Posts

,

Surcharge Stories

It is now just over a year since revised rules relating to Stamp Duty Land Tax implemented.

The aim seemed straightforward; SDLT payable on the purchase of our home is payable at a basic rate, but if we buy an additional residential property we pay the normal rate plus a 3% surcharge.

However in practice the legislation can give rise to many surprises and anomalies;

For example, say Mr and Mrs C lived in a cottage provided by Mr C’s employer, several years ago they bought a buy to let property.  Mr C has now changed his job and no accommodation is provided.  They decide to buy a home to live in, without selling the buy to let.  They must pay a surcharge on the property they are now buying because they already own a property. If Mr and Mrs C had always owned their home, and were now selling and replacing it, normal rates would apply.

Married couples are treated as one entity; so, say a couple Andrew and Belinda, both home owners decide to marry and move in together into Andrews’s house;  Andrew can afford the mortgage so there seems no need to put the property in joint names.  Belinda decides to sell her house and replace it by a small flat, and the flat is nearby that will be more convenient to let out, than her former home.  Because they are a married couple the purchase of the new flat will be subject to the surcharge.  If they were not married it would be at the normal rate

These are two very specific examples. Lease Extensions, Transfers of Equity, Company purchases, people owning property abroad, partnership property and more can all be caught by the surcharge. There are also some surprising exceptions.  If you or your spouse any interest in another property, it might be worth getting advice on SDLT before buying, to help with budgeting.

It might even affect your actions – Stamp duty considerations might not have deterred Andrew and Belinda from marrying, but they might wish Belinda had bought her flat before the wedding, they could have saved enough to pay for an expensive honeymoon!

 

 

 

/by

Confusion Not Stamped Out?

Almost a year has passed since George Osborne announced a new additional rate of Stamp Duty Land Tax (SDLT) to come into effect for those owning second homes and investment residential properties.

Despite the passage of time, the new regime continues to throw up problems, such as the following:

The first common problem relating to the additional SDLT charge occurs where parents assist their children in the purchase of a property.   For example, a father might assist his daughter to purchase her property by sharing the cost with her and having the property put into joint names.  Even though the property would be the daughter’s first property, if her father had not replaced his principal residence and was named as a legal owner at the end of the day of the transaction, the higher rates of SDLT would apply.

A second example where a purchaser will be caught out by the SDLT changes  is that of a couple purchasing their first home together, where one member of the couple has an existing property which he or she does not sell.   Whilst this is not an additional property for both members of the couple, the transaction is nevertheless subject to the SDLT surcharge.

The rationale for the SDLT Reform was to make the market easier for first time buyers, but these examples shows consequences which run contrary to this principle.

A further example is where there is an overlap between an individual’s purchase of their new main residence and the sale of their previous main residence, if, at the end of the completed purchase transaction, the purchaser owns two residential properties.   The purchaser would then have to pay the higher rate of SDLT.   This would be subject to the fact that it is possible that the SDLT could be recouped by the purchaser if the first property is sold within three years.

For advice in relation to this and numerous other aspects of the conveyancing process, contact Nicholson Portnell, where we will be pleased to help with your queries.

/by