Rules on the 3% Stamp Duty surcharge are so confusing that even an experienced estate agent almost fell foul of them.
David Poole, a partner at Michael Poole estate and letting agents in Teesside, was buying a property with his wife Emma.
The couple were moving out of rented accommodation and it never crossed their minds that they would have to pay the surcharge. Poole had sold an earlier home over ten years previously.
However, they were told that because Emma owned two buy-to-let properties, they would have to pay an extra £14,160.
Poole, 35, said the first he knew that they would have to pay the surcharge was when his solicitor rang and told him.
He said: “I have worked in the property industry for 18 years and find it hard to believe how little information is available on the second-home charge.”
Poole, who has been an agent for 18 years, took other advice from solicitors and tax experts, and all said that the 3% surcharge was payable.
Even HMRC’s Stamp Duty calculator said the couple would be liable to pay the extra sum.
He and his wife ended up paying almost £28,000 in Stamp Duty, thankful that they had savings put aside.
However, he continued to believe that they should not have paid the surcharge and involved the Money section of the Sunday Times.
After two months of investigations, the Sunday Times established that Poole was right – there was no liability, because of a transitional rule.
If a buy-to-let owner sells their first main home before November 25, 2015 – when the surcharge came in – and completes on the purchase of a new main residence before November 26 this year, there is no 3% extra to pay.
HMRC has now accepted this is the case and the Pooles are due an exemption.
Commenting on the case to the Sunday Times, property buyer Henry Pryor said: “I’m sure there are people who have miscalculated their tax and not moved as a result of the mistake, as well as people who have paid too much tax on their purchase.”
Could have bought in his own name
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No he couldn’t. Married couples are counted as one person for this purpose.
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I don’t think the date is specific here, i.e. 25th November 2015 – 26th November 2018, I believe it is down to the sale/purchase taking place within 3 years of each other. I may be wrong though, seems to be a minefield!
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Until the transitional arrangements end, it doesn’t matter how long ago the previous disposal of main residence was in this kind of case – so long as they haven’t bought any investment property since the sale. After that date, your summary will be correct.
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That makes sense now I’ve re-read it; many thanks!
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The Q & A below is taken from HMRC Guidance Notes available since November 2016:
I am currently living in rented accommodation, having sold my previous main residence nearly 18 months ago. I am now looking to purchase a new main residence within the next few months. I also have a number of buy-to-let properties. Will I have to pay the higher rates on the purchase of my new main residence?
If you purchase your new main residence on or before 26 November 2018 the higher rates will not apply as you will be treated as replacing your main residence. If you purchase your new main residence after 26 November 2018 you will be treated as replacing your main residence provided you purchase your new main residence within 3 years of the sale of your previous one.
If anyone would like a copy: rh@boldgroup.co.uk
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I too had issues with HMRC and my solicitor when buying a new home. Right up until completion the solicitors where adamant that we would owe two lots of btl stamp duty as we were ‘letting to buy’ and owned a further btl.
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“I have worked in the property industry for 18 years and find it hard to believe how little information is available on the second-home charge.”
Then you should have known better than to assume – should have checked first. I appreciate this guy is only publicising his ‘plight’ to get positive PR for his agency (fair enough) but do it with something that doesn’t make you like a plank………
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So what this article says is that a married couple can own buy to let properties and purchase a home for themselves and avoid the 3% surcharge? So surely there is no difference if you’re remortgaging your current property as a buy to let and replacing this home with another purchase? Very confusing? I would like to replace my current home with a new purchase and make my current home a buy to let, do I have to pay the 3% extra?
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I trust Mr Poole has been awarded a significant compensation package by HMCR for the time and effort that was needed to prove he was correct. Sloppy officials and incompetence by Government departments is rife.
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