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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5016
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Should I pay the additional 3% SDLT levy when buying a new

Customer Question

Should I pay the additional 3% SDLT levy when buying a new main residence as I am currently renting my main residence but own a buy to let?
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
I previously bought a main residence in 2000 and sold it in 2005. I then bought a new main residence in 2005, lived in it for 18 months, moved out and started renting it to tenants from 2007 onwards.I currently live in a rental property with my wife. She owned her main residence from 2006 until 2013, when she moved out and starting renting it out to tenants. She sold this property earlier this year (March 2016).
Expert:  taxadvisor.uk replied 1 year ago.

Hello and welcome to JustAnswer. I am here to help you. I am reviewing your question and will respond to you shortly.

Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your question

There are four conditions that have to be met for the higher rate to apply.

In my view you will not meet Condition D i.e. the dwelling being purchased is not replacing the purchaser’s only or main residence and therefore the extra 3% stamp duty will not apply.

This is more explained under "For the purposes of Condition D, there are two parts to a replacement of a purchaser’s main residence:" here

http://www.olswang.com/articles/2016/03/hmrc-issues-guidance-on-the-extra-3-stamp-duty-land-tax-for-additional-residential-properties/

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 1 year ago.
Many thanks for your response. I've been sent the attached document by our solicitor who's highlighted the flowchart on page 2 - it says 'Is the property being purchased replacing your main residence (which is being sold)' . As we're not selling our main residence (because we can't as our current main residence is a rental property), this suggests the higher rate does apply? Does condition D supersede this? Apologies for the confusion, it's just that we've seen and heard so much differing advice on this.
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your reply. In my view condition d should apply

This may be relevant and you may wish to bear this in mind in the event 3% stamp duty is applicable ..

However, the additional tax paid as a result of the transaction can be reclaimed by amending the return for the purchase if in the subsequent three years after the purchase, the purchaser sells a previous main residence thereby replacing the main residence. The previous main residence must have been the main residence of the purchaser at some time during the three years before the purchase of the new main residence. There is also a replacement of a main residence if in the subsequent three years after the purchase, the purchaser’s spouse or civil partner sells a previous main residence. The previous main residence must have been the main residence of the purchaser at some time during the three years before the purchase of the new main residence.

To overcome the hurdle, you may wish to sell your property that was your main residence at some point and reclaim the extra 3% stamp duty and purchase a second property at a lower price to mitigate extra 3% stamp duty.

I hope this is helpful.

Please only rate my answer if it is acceptable.

Expert:  taxadvisor.uk replied 1 year ago.

Your wife has sold her residence that was her main residence until she moved out to a rented property.

Customer: replied 1 year ago.
Many thanks for your response. Does our liability for the extra 3% change if the rental contract for our current main residence doesn't end on the day of purchase but, instead, ends one or two weeks after the purchase (completion) date for our new main residence, or would it be the date we move out of our main residence if it's a rental property?
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your reply..

The previous main residence must have been the main residence of the purchaser at some time during the three years before the purchase of the new main residence .. its the move out date.

I hope this is helpful.

Customer: replied 1 year ago.
Thanks again. I understand from our solicitor that if we declare that we're not liable for the additional 3% but, in the future, HMRC decide that we are, they could choose to penalise us for not having paid the surcharge (in addition to recovering the additional 3% owed). Is there anything we can do at this stage to protect us from any future penalties like this eg by being able to prove we took advice etc?
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your reply.

I am sorry for the delay in my response as I was away from my desk.

You may wish to call the technical helpline at HMRC to clarify the position to alleviate any concerns.

I hope this is helpful.

Customer: replied 1 year ago.
Hi, I've just spoken to HMRC on their helpline and they think that we are liable for the extra 3%. I've also been directed to their guidance note of 16 March: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/509184/GuidanceNote_Final.pdfSpecifically, on page 24, Q2:Q2. I currently live in rented accommodation but own a property that is rented out. I
am now looking to purchase my first home, for me and my family to live in. Will I
have to pay the higher rates of SDLT on this purchase?
A2. Yes, the higher rates of SDLT will apply as following the purchase you will own an
additional residential property (and will not have replaced your main residence, i.e.
sold a current main residence and purchased a new one).This suggests that I am liable for the extra 3% as I'm technically not replacing my main residence so I do meet condition D?
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your reply.

I am glad you have got this clarified.

Please don't rate my answer and seek a refund of deposit paid.

Many thanks.

Customer: replied 1 year ago.
Will do, thanks.
Expert:  taxadvisor.uk replied 1 year ago.

Many thanks.

Best wishes