Should you use the HMRC SDLT calculator for SDLT liability?
Do not always rely on HMRC SDLT calculator when assessing SDLT liability if you own a second property…seek legal or tax advice.
I have recently advised a Buy to Let (“BTL”) Investor who, having gone through the HMRC Stamp Duty Land Tax (“SDLT”) Calculator, believed that if he completes on a purchase of his main residence, SDLT surcharge would be payable.
The situation is as follows:
Client sold property A, his main home, in 2013
The client then bought property B which is a BTL property in 2015
Having sorted out a few issues with his BTL, the client is now (2018) ready to buy his new main home, i.e. property C. This is however 5 years after his main residence was disposed of.
If you try to add the above details to the HMRC SDLT Calculator, SDLT would be calculated at a surcharged rate. When you indicate that the property being purchased shall be a second property (i.e. property C), the system then indicates:
‘Is the property being purchased replacing your main residence? If your previous main residence has not yet been sold choose “No”. A refund may be available if the previous main residence is sold within 3 years’.
Having spoken with many professionals, not many people are aware that the above 3-year rule does not come into effect until 26.11.2018
The HMRC Calculator and their Guidance can be, on occasion, too simple and your legal or tax adviser needs to assess and interpret the actual legislation, i.e.: Finance Act 2016, Schedule 4ZA (https://www.legislation.gov.uk/ukpga/2016/24/section/128/enacted) and specifically clause 19 (8) and (9) in combination with clause 3(6).
When I pointed out the above discrepancy to HRMC a few days ago when telephoning them, they confirmed to me that until 26.11.2018 when the 3-year rule for replacement of main residence exemption comes into effect, all that matters is that client is purchasing a new main residence, having disposed of his old main residence at ANY time in the past. Therefore, my client is not liable to pay the surcharge even though he sold his main residence 5 years ago. As a result, client can benefit from saving £9,300.00 on tax payable (£5,500.00 instead of £14,800.00).
This article is not intended to give any legal advice and it is only intended to demonstrate that SDLT rules are very complex and HMRC published Guidance and Calculator is not always entirely accurate (i.e. in trying to be user-friendly, it does not always follow the language used in the actual legislation). The rules are very complex indeed. We would always recommend speaking to HMRC or writing to them if in any doubt about SDLT.
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