Following on from my earlier blog about replacement residence relief, there are some details relating to circumstances, which could make way for a tax claim.
Home buyers can be liable to the 3% SDLT surcharge if they sell their main residence prior to purchasing their new home if they also have an interest another residential property worth more than £40,000. The interest in another residential property might be an investment property or a holiday home.
The liability to pay the 3% SDLT arises as on the completion day of purchasing the new home the buyer also has an interest in another residential property and therefore meets the criteria to pay the extra 3% SDLT.
Here is an example to consider:
Bob owns his home in Battersea and a holiday home in Devon. He decides to take a career break and sells his home to go on a two year trip to South America. On his return to the UK, Bob takes up a job in Reading and purchases a new home nearby for £400,000. Bob is alarmed to learn that he will have to pay the 3% SDLT surcharge on the buying his new home due to his ownership of the holiday home in Devon. This will cost him an extra £12,000 in tax.
There is relief available in the legislation to help Bob and prevent him paying an extra £12,000 of SDLT.
The relief exempts the purchase of the new home from the 3% SDLT surcharge if all the following conditions are met:
In Bob’s example above he meets all three conditions and will not have to pay to the 3% SDLT surcharge.
Would the relief be available if Bob had rented a flat in the UK prior to purchasing his new home? Yes, in these circumstances Bob would still be entitled to relief.
Does the position would change if Bob had purchased a flat in South America which he used as his home whilst on his travels? In this case the relief would still be allowable as the flat in South America is not liable to SDLT.
However, the relief would be lost if Bob had purchased a flat in Reading which he used as a residence whilst looking for his final home. The relief only applies to the first purchase of a new home following the sale of the original main residence.
There is an extension of the time allowed between the sale of the old main residence and purchase of the replacement if the new home is purchased before 18 November 2018. For purchases before this date there is no restriction on how long ago the previous main residence was sold – that is the previous main residence can be sold more than 3 years prior to 18 November 2018.
The relief will normally be claimed on the SDLT return submitted for the purchase of the new home. If it is not and the 3% SDLT surcharge is paid then an amended SDLT return can be submitted within 12 months of submitting the SDLT return.
Every individual circumstance will differ and we would always recommend seeking advice, tailored to your own particular circumstances from the tax team at Wilkins Kennedy. Contact us today to see how we can help.
If you inherit property, there is usually no Stamp Duty Land Tax (SDLT), unless the beneficiary is paying money into the estate or paying other beneficiaries. However, there are an increasing number of people getting caught up in an SDLT ‘trap’ when circumstances relating to the inherited property change.
Last year, the Treasury collected more than £5 billion in inheritance tax (IHT), which as a percentage of the total tax receipts, puts IHT at one of the highest levels it has been since the early 1980s. Giving some thought to tax planning can help relieve the sting from the taxman.
Following on from my earlier article about replacement residence relief, there are some details relating to circumstances, which could make way for a tax claim.
A recent story reported that HMRC has handed back £127m in Stamp Duty Land Tax (SDLT) charges. Despite the daunting headline, these claims are perfectly legitimate and apply to anyone who has sold their main residence at some point after buying a replacement.
When the Government introduced the increased Stamp Duty Land Tax (SDLT) for second homeowners, there was significant concern in the legal sector that this could account for a reduced amount of conveyancing work for law firms, as people delayed, or even postponed, their Buy to Let purchase in view of the increased cost.
From April 2017, property investors and landlords will be subject to what has been labelled as the Chancellor’s “biggest attack” on the UK’s buy to let market. There’s no denying that purchasing property to let has become more expensive than a year ago. Since then, landlords have faced an additional surcharge of 3% on top of existing Stamp Duty Land Tax (SDLT) and they have foregone the wear and tear allowance which has now been replaced with a Replacement Relief.
The season for ATED returns is nearly upon us and if this applies to you then no doubt you will soon be busy with preparations. It might also be a good time to familiarise yourself with some recent updates in relation to ATED charges. Property worth between £500,000 and £1 million are now in the scheme and are subject to tax, where as previously there would have been zero liability. If this applies to you, then you might want to listen in.
The Government recently announced some changes relating to the way non-domiciled individuals are taxed. Following initial consultation, responses were published in draft legislation on 5 December 2016, but there was still some uncertainty relating to the rebasing of individuals who were resident non-domiciled. A further update has now provided some clarification.