How does the 3% SDLT surcharge apply where a married couple are replacing their home which is not owned by both?

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His wife has a share in another property with her sister.  The family home has been the main residence for both of them for several years but they are now moving although the new house will still be in my client’s sole name.  At first glance, the higher rates do not appear applicable as he only has the one property.  However, the rules on married couples bring his wife’s property into the equation.

The wife is also replacing her main residence in reality, i.e. moving home, but as she is not on the title to the family home, I’m not sure whether she qualifies?  All the notes talk about “the purchaser” but the wife is not purchasing.  My client states his wife has no beneficial interest in the family home – although I suspect the divorce courts would say different!

Common sense suggests the higher rates should not apply but that’s not much reassurance”

Source: BLG Member

You are right.

Where one party to a marriage (or a civil partnership) is a sole purchaser and the parties are ‘living together’ (applying the test in section 1011 ITA 2007) on the effective date of the purchase of a dwelling (normally completion) the tests for the 3% surcharge are applied to both parties individually even though one is not a purchaser and has no interest in the property.  If one is caught the surcharge applies.  However here the replacement of only or main residence exemption will apply to both (even though the wife has no interest in the one that is sold) as:

(1)  She intends the new house to be her only or main residence;

(2)  Her spouse will have sold a dwelling which had been her 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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