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Stamp Duty SDLT - Replacing Main Residence?

Main residence sold more than 3 years ago, is higher rate SDLT due?

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As far as I'm aware, if we have a BTL property and purchase another property as our main residence we can only treat it as the replacement of a main residence and avoid the higher rate of SDLT if the main residence it is replacing was sold less than 3 years prior to the purchase. Yet if I look at the gov.uk SDLT sections and use the gov.uk SDLT calculator it calculates that the lower rate is due, doesn't ask how long ago the main residence was sold and the SDLT sections do not seem to refer to the 3 year time limit.  So is my understanding incorrect?

If I am correct, can we give an interest in the BTL property to our kids so that our remaining interest has a market value of less than £40000 each for my wife and I and then pay only the standard rate of SDLT on our new main residence?

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12th Jul 2019 21:02

BryanS1958 wrote:

If I am correct, can we give an interest in the BTL property to our kids so that our remaining interest has a market value of less than £40000 each for my wife and I and then pay only the standard rate of SDLT on our new main residence?

Do you like paying CGT?

Seek professional advice.

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to Adam12345
14th Jul 2019 10:31

Thanks - no CGT, covered by annual exemptions.

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13th Jul 2019 18:41

You are right, to be able to use the sale of the previous main residence so as to come within "the replacement exception" you must have sold it within the previous three years. The calculator asks "Is the property being purchased replacing your main residence?" without giving an explanation of the three year tests that apply.

You do not say how old your kids are. If under 18 then their interests are treated as your interests for the purposes of the 3% surcharge. But you would succeed in forever robbing them of the status of first time buyers for the purposes of SDLT first time buyers' relief!

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to JohnShallcross
14th Jul 2019 10:34

Thanks - I'm inclined to file Stamp Duty form using Government guidance and calculator, neither of which refers to 3 year rule and wait for HMRC to tell me I'm wrong:-)

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14th Jul 2019 15:15

The guidance at SDLTM09800 is quite clear on this. The three year rules apply.

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to JohnShallcross
15th Jul 2019 10:46

Thanks John, that comment was a bit tongue in cheek, if I know the correct position I could hardly claim innocent error:-) It is clear in the manual, but for a layman just using the gov.uk calculator (no mention of 3 year rule) or 'normal' notes on gov.uk website e.g. https://www.gov.uk/stamp-duty-land-tax/residential-property-rates they would not know there is a 3 year rule. The calculator and notes should be correct, or should clearly indicate that they are not comprehensive, and the user should be referred to manuals and legislation. Only then, if the user is not confident they understand what to do, should it be necessary to seek professional advice.

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to BryanS1958
15th Jul 2019 14:37

Such an argument is at best disingenuous and at worst dangerous (I doubt it would avoid a penalty or possibly worse if HMRC were to enquire into your SDLT1 - which HMRC commonly do re the (absence of the) 3% SDLT surcharge).

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to Justin Bryant
15th Jul 2019 14:43

As an argument - yes, it's useless.

As a comment on the guidance - it has validity. You should be able to tell from what you are looking at that it's (excessively?) simplified. As it is, it relies on the reader asking "what does 'replaced' mean?" and then looking for (and finding) the answer.

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to Tax Dragon
15th Jul 2019 16:05

It would also only take them a few minutes to include the 3 year rule in the summary and a bit of developer time to add a question to the calculator 'when did you dispose of your main residence?' and to give the correct result.

I suspect it would take them slightly longer to explain why the rule is there at all. It is most unfair in many circumstances.

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to Justin Bryant
15th Jul 2019 15:58

I wasn't suggesting it as an argument, as I say a bit tongue in cheek. But really HMRC/Government should at least get their summaries and calculators correct if they want to penalise taxpayers for getting it wrong.

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