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SDLT 3% repayment

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So a client bought a new house to live in but "couldn't" sell his flat (well only at a substantial loss) and thus paid the extra 3% SDLT. He rented the flat hoping value would come back up and then planned to sell within the time limit to reclaim the 3% extra stamp duty paid. Unfortunately covid has scuppered plans (people don't want city centre flats) and he still can't sell (flat was marketed empty for several months) and now time is running out to reclaim the 3%. I am aware that HMRC may consider extensions but that's a bit too vague and as property is rented I'm not sure he'd get the outcome he wants.

So my question is can he sell to his own Limited Company and thus claim the refund or is there any connected party anti-avoidance (I can't see any). I know the company will still pay the 3% SDLT but the net difference is still significant as he now has a family house compared to his old batchelor pad.

 

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Jason Croke
By Jason Croke
13th Apr 2021 08:15

Client can sell the dwelling to the Limited, the Limited is not the same as the person, so the individual would be able to reclaim their 3% surcharge relating to the purchase of the family home....but they'd have to pay 3% surcharge on the apartment going into the company.

The sale of the dwelling into a Limited company would be at market value and then SDLT at 3%.

You've provided no figures in your question, so also consider if ATED applies, cost of annual accounts/filing, plus the CGT liabilities of holding property in a company.

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Replying to Jason Croke:
Kitten
By Hazel Accounts
13th Apr 2021 10:25

Thank-you, yes, I did hope it would be OK as a separate legal person.

I will need to work through CGT as the Ltd will obviously not have an annual allowance and he will also lose PPR relief, but the property is unlikely to make much gain so may be much less than stamp duty recovered. (He's got over £20k net SDLT he could recover even after paying on the Company purchase). I am also aware ATED may be an issue - The property didn't sell at 535k, but he says would be snapped up at 495k so ascertaining fair market value is another headache. Temporary admin of company may be offset by tax saved on rent as he is higher rate as an individual and doesn't need to draw the income out. He also has to look into the mortgage position, but it isn't worth looking at these other considerations until I am sure he can jump the first hurdle of knowing the 3% SDLT is recovereable.

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By Justin Bryant
13th Apr 2021 08:51

Perhaps he can find someone friendly to gift the flat to SDLT-free?

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Replying to Justin Bryant:
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By The Dullard
13th Apr 2021 09:09

Why does he have to give it to someone friendly? Why can't they be unfriendly? Or were you suggesting tax evasion?

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Replying to The Dullard:
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By Tax Dragon
13th Apr 2021 10:17

Where've you been, Dulls? Justin doesn't see it as evasion*.

There was a spate of gift-and-gift-back questions near on a year back. Although Justin did concede that the gifts might be consideration, the one for the other, and you could end up with SDLT all over the place, he maintains that a transfer is a gift if it's not enforceable by the transferee**. He may be right in law - IANAL - but, for tax purposes, I'm not convinced that matters.

*And he may be right - if your actions mean you pay more SDLT than you 'evade', have you 'evaded'?
**See closing line of his OP here: https://www.accountingweb.co.uk/any-answers/that-recent-sdlt-gift-gift-b...

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Replying to Tax Dragon:
Kitten
By Hazel Accounts
13th Apr 2021 10:34

I'm fairly sure my client doesn't want to get involved with gifting - besides which the property has a largeish mortgage so I don't think could be done anyway.

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