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Stamp Duty Update

The new rules for stamp duty have now finally been published. There are substantial alterations from the guidance given previously and the new rules are as follows...

If your purchase completes after 31 March 2016, then there will be an extra 3% stamp duty if, at the end of the day of completion, any purchaser on the title deeds owns another property (residential or commercial) anywhere in the world, unless there is an exception. This leads to some odd situations, which we can best illustrate by way of example:

- Bill and Maureen own a holiday cottage in Wales and a flat in Surrey. They sell the flat for £200,000 and buy a new house from a builder for £300,000. The flat is their main residence and the new house will also be their main residence. 

They complete on the sale and purchase in the usual way. Because they are replacing their main residence, they pay the usual stamp duty on £300,000 which is £5,000. They don’t pay the 3% supplement.

- Bill and Maureen buy and sell as above, but this time they decide to sell first and live in rented accommodation until the new house is built. They don’t pay the supplement.They can have a gap of up to 3 years between sale and purchase before they have to pay duty.

- Bill and Maureen buy and sell as above, but this time they decide to complete the purchase first and sell the old one as soon as they can. They must pay £5,000 plus the 3% supplement of £9,000 for a total of £14,000. They can get the £9,000 back if they sell their old flat within 3 years (but not if they sell the new house).

There are numerous anti-avoidance provisions. If you are a couple living together, if 1 party owns another property then the extra tax is payable even if th enew property is bought in the name of the other party. If the proerty is bought in the name of a nominee but you get to live there, it counts as buying it.

If you only own one property, it does not matter what it is for:

- Mohammed lives in rental property and buys a buy-to let property. He does not pay the supplement. If he owned a flat abroad, he would have to pay it even (presumably) if his flat abroad was only a timeshare.

The law is therefore clearer than it was before today, but the are stil some odd rules. For example, you can buy a houseboat, or a caravan or mobile home, or a lease of under 7 years, without triggering the new rules.But if the lease was originally for over 7 years you pay the extra tax. For example:

Sandra owns a flat but decides to buy a cottage which has a 100 year lease, of which there are 4 years left to run. She is told that she will have to pay the 3% supplement. She therefore buys the cottage next door instead, which has a brand-new 4 year lease, so no extra tax is payable.

You do not pay the extra 3% if the extra property you are buying costs less than £40,005.

Watch out if you own property abroad- in some places on the Government website it says that properties outside England & Wales don't count. If you read the small print, they do.

This is a broad guide to the new rules- please don't rely on it as advice as there are exceptions and special rules I've not mentioned. We can give advice on the tax but there will be an extra charge. The full guidance is set out at:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508272/GuidanceNote_Final.pdf.

Posted in: Property, Stamp Duty

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