Does relief from the 3% SDLT surcharge for replacing a home apply?

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“We have just been instructed to act on behalf of a client who, along with his wife, is currently living in a rented property, having moved out of his main residence which is being occupied by our client’s brother and his family, to whom the property is currently in the process of being sold. Our client tells us that the property in question was previously his main residence and that, following the death of his father, he has inherited the property. The arrangement is that the property be sold by our client to his brother at an undervalue.  Naturally, the brother is being separately represented.

Our client advises us that he also owns other buy to let properties.

My question relates to the amount of SDLT on the purchase of the new home. Will this be at the rate for additional dwellings or at the standard rate? We anticipate the increased rate will not apply as the main residence is being replaced.”

Source: BLG Member

 

If the sale to the client’s brother completes before the purchase of the new home the 3% surcharge will not apply provided there is a replacement of an only or main residence.

The disapplication of the surcharge where the purchase is the replacement of an only or main residence and the purchase of the new home takes place after the sale of the old one has three conditions.  For purchases with an effective date on or before 26 November 2018 the conditions are:

(1) On completion of the purchase of the new dwelling each spouse intends the new home to be his or her only or main residence;

(2) In a transaction which takes place before the date of completion of the purchase of the new home the couple or one member of the couple has disposed of a major interest in another dwelling (“the sold dwelling”);

(3) At any time before the date of completion of the purchase of the new home the sold dwelling was the couple’s only or main residence.

If the new home is purchased after the sale the surcharge must be paid but can be reclaimed provided that the following three conditions are met:

(1) On completion of the purchase of the new dwelling each spouse intended the new home to be their only or main residence;

(2) In a transaction which takes place within three years from the date of completion of the purchase of the new home the couple or one member of the couple disposes of a major interest in the sold dwelling;

(3) At any time during the period of three years ending on the date of completion of the purchase of the new home the sold dwelling was the couple’s only or main residence.

At the time of publication this response was correct however as tax legislation and practice change from time-to-time you should take specific advice before taking any action.

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