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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15914
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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A Stamp Duty Land Tax question. We have a buy to let property

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A Stamp Duty Land Tax question.
We have a buy to let property (1 bed flat) that we have held for 10 years. We have just placed it up for sale.
We sold a property in the last year, which was at one time our family home. However, we have rented it out for five years. It therefore does not qualify as having sold a main residence in the last three years (we have been renting).
We are in the process of buying a family home to live in.
In these circumstances we are being advised we will be liable for the additional 3% SDLT rate.
Other than selling the flat before we complete the purchase (which is not proving likely) is there anything we are able to do prior to completion (circa 4 weeks) to avoid being liable for the higher rate of SDLT (an additional 20k).
Many thanks
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. I'm afraid that there is nothing you can do short of selling the buy to let property you have owned for 10 years first. If you look at the eleventh paragraph of section 2.8 in the document here, you will read that in order for a previous home to be treated as your main residence for the purposes of the stamp duty increase, it must have been so in the 18 months before the purchase of the new property. That is, you must have lived in it in the previous 18 months. Clearly, as the new rules are in their infancy, nothing has been tested in court. However, I cannot see that moving into your buy to let property and claiming that it is your main home whilst trying to sell it and buy another property at the same time will work to avoid the increased stamp duty. The general anti avoidance rule will probably be used in a situation such as that as it will be seen as aggressive tax avoidance. I'm sure there will be schemes designed by smarter people than me to try to avoid the stamp duty increase but the government has drafted the legislation pretty well for once in my opinion by keeping it as simple as possible. I hope this clarifies the position for you bt let me know if you have any further questions.
Customer: replied 1 year ago.
The document you referenced is last year's consultation document. I'd read the more up to date March 2016 guidance here prior to asking my question: substantive change post consultation appears to have been an increase in the main residence sale qualifying period to 3 years. This does not impact our situation as we had rented our recently sold property for five years.I'm waiting for HMRC to reply to me on point 3.22 of the guidance which states 'The three year period for this test will not be applied for purchases on or before 26 November 2016. This is a transitional provision so as not to disadvantage those whose last disposal of a main residence was before the announcement of the higher rates on 25 November 2015.' This appears to me to include our purchase - what is your interpretation of this clause?ThanksNeil
Expert:  TonyTax replied 1 year ago.
I'll get back to you on that in a bit.
Expert:  TonyTax replied 1 year ago.
I found something here which should confirm what you hoped, ie that you should not pay the higher rates of stamp duty. It's the government's changes to the rules as a result of responses to the consultation. If you look at paragraph 1.30, you will read that for those who disposed of a previous main residence before 25 November 2015, the three year period to replace it will start on 25 November 2015, ie as if that main residence was sold on 25 November 2015.
Customer: replied 1 year ago.
Hi was there a link in your reply? It's not working if so.
Expert:  TonyTax replied 1 year ago.
OK. Let me post the link again.
Expert:  TonyTax replied 1 year ago.
Here is the link:
Customer: replied 1 year ago.
Thanks. I'm not sure that would help us as we would still fail the sale of a main residency test regardless of that amendment. We had not lived in the house we sold last year for five years. So it's not falling outside the disposal within three years rule that is likely to be the issue (the sale and new purchase transactions will be less than twelve months apart). It's whether HMRC would view the sale as having been our main residence.
Expert:  TonyTax replied 1 year ago.
That's the point that HMRC should answer in response to your enquiry. I called HMRC today but was unable to get an answer and will have to wait for a call back. Having read through anything I can find on this in light of the changes and through your initial question again, it would defeat the object of the new rules to allow a property that has not been a main home for five years and has in fact been let before its disposal before 25 November to be treated as a main home for the purposes of the increased stamp duty rules. Therefore, you will have to pay the higher SDLT in my opinion. Paragraph 3.20 here (the document you found) would appear to back me up.
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