Will Stamp Duty Land Tax (SDLT) or higher rates of SDLT be payable for unmarried couples separating and re-arranging the family home ownership?
An unmarried couple are separating after many years together, as part of the separation one of them has agreed to buy her partner’s joint interest in the family home for £300,000. Will Stamp Duty Land Tax be payable on this acquisition, and if so, as she also owns a rental property, will the additional 3% rates apply?
The Finance Act 2003, Schedule 3, Paragraph 3A provides an exemption from SDLT on transactions made in connection with the ending of a marriage or civil partnership. As the couple never married, this exemption will not apply and SDLT will be due on the £300,000 consideration paid by the person who is acquiring the joint interest from her ex-partner.
Legislation at Schedule 4ZA of Finance Act 2003 contains provisions for SDLT rates to be increased by 3% for the acquisition of additional dwellings. Generally, these rules apply to a transaction if the purchaser has an interest in more than one dwelling unless the property acquired is replacing a main residence that has been, or will be, disposed of in the period 3 years before and 3 years after the acquisition. In this instance, your she does own more than one residential property, but she has not disposed of her main residence, and so it would appear that the 3% additional rate would apply.
However, the Finance Act 2018 brought in some minor amendments to provide relief to higher rates of SDLT in certain circumstances. One of these covers the situation where a purchaser adds to their interest in their current main residence.
As such, with the exception of a leasehold interest with less than 21 years to run or a joint interest of less than 25%, transactions after 22 November 2017 will not fall within the higher rate rules if:
- The purchaser had a prior interest in the purchased dwelling immediately before the date of the transaction, and
- The purchased dwelling had been the purchaser’s only or main residence throughout the period of three years ending with the date of the transaction.
Therefore, provided the property in question has been her only or main residence throughout the last three years, although SDLT will be payable, the additional 3% higher rate will not apply.
Higher rates for additional dwellings – FA 03, Sch 4ZA
Paragraph 7A inserted in FA 03, Sch 4ZA by FA 18 with effect in relation to any land transaction of which the effective date is, or is after, 22 November 2017.
This tax Q&A was published in August 2018 – please be aware that the information above may have changed in subsequent months. This note is written for the general interest of our clients and is not a substitute for consulting the relevant legislation or for taking professional advice.
(This content was originally produced by Croner Taxwise Limited and is reproduced with their permission)