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Stamp Duty Land Tax surcharge rules – taking a walk on the quirky side

22nd March 2018

Many house buyers express confusion about the intricacies of UK Stamp Duty Land Tax, especially if they are considering investing in a second property – and it is true the rules can throw up some quirky stamp duty scenarios.

In essence, if you buy a new home to live in as your only or main residence before selling your existing main residence you have a period of three years to dispose of your previous main residence if you want to claim back the three per cent stamp duty surcharge currently levied on purchases of second properties.

On the other hand, if you buy a new property to live in as your only or main residence after selling your previous main residence but you are liable to pay the surcharge because, for example, you own buy-to-let properties, you may escape the surcharge altogether if your new home will be your only or main residence. Under the complex rules, even the sale of your home many years ago may qualify as the replacement of your only or main residence – and this can throw up quirky stamp duty scenarios.

Consider a hypothetical situation in which Jack and Jill sell their Mayfair apartment to go sailing round the world for a few years before returning to the UK, where they then buy a country house to live in and a buy-to-let flat to provide an income. Will either, or both, purchases attract the three per cent surcharge?

Under the current rules, if they buy their house before or at the same time as the flat, the surcharge will not be due on the house because only one property is owned at the time of purchase and the replacement of main residence exception will apply. The surcharge will apply to the purchase of the flat because at the time of this transaction more than one dwelling is owned and the replacement exception does not apply to the flat.

However if Jack and Jill buy the flat first the surcharge may not apply to either transaction. The flat purchase will escape the surcharge because at the time of completion only one dwelling is owned, while the subsequent house purchase is exempt under the replacement of main residence exception.

For more information on stamp duty, property purchases and buy-to-let, or for advice on all aspects of conveyancing and property law, contact the George Ide team on 01243 786668 or email us at info@georgeide.co.uk

Mike Berry. Residential property department

General, George Ide, News, Residential Property Conveyancing
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