How to nav­i­gate the maze of stamp duty on houses

Wor­thing tons solicitors of­fers ad­vice on over com­ing the ob­sta­cles you face when pur­chas­ing land or a prop­erty over a cer­tain price

Belfast Telegraph - Business Telegraph - - Front Page - By Ja­neen Mckay, Wor­thing­tons Solicitors Ja­neen Mckay spe­cialises in prop­erty mat­ters at Wor­thing­tons’ New­tow­nards of­fice and can be con­tacted on 02891811538

You must pay Stamp Duty Land Tax (SDLT), a self-as­sess­ment tax, when you pur­chase a prop­erty or land over a cer­tain price in North­ern Ire­land.

The cur­rent thresh­olds are £125,000 for res­i­den­tial prop­er­ties and £150,000 for non-res­i­den­tial land and prop­er­ties. With ef­fect from April 1, 2016 the gov­ern­ment in­tro­duced a con­tro­ver­sial higher rate of SDLT on purchases of ad­di­tional res­i­den­tial prop­erty.

This means that the sur­charge ap­plies to sec­ond homes and rental prop­er­ties.

The sur­charge was in­tro­duced to sup­port home own­er­ship and first time buy­ers but hits in­vestors and sec­ond home­own­ers hard.

In sim­ple terms, the sur­charge is payable, if, upon com­ple­tion of the trans­ac­tion, the pur­chaser owns two or more res­i­den­tial prop­er­ties and is not re­plac­ing their main res­i­dence.

One of the ar­eas which causes dif­fi­culty is the re­place­ment of the pur­chaser’s main res­i­dence.

The Trea­sury is very strict on the def­i­ni­tion of a main res­i­dence. This is based on fact.

HMRC will take into ac­count where the in­di­vid­ual spends their time; where the chil­dren go to school; at which res­i­dence they are reg­is­tered to vote; where they work and their cor­re­spon­dence and reg­is­tra­tion ad­dresses given to var­i­ous or­gan­i­sa­tions.

You can­not elect which prop­erty is your main res­i­dence.

This is straight­for­ward when deal­ing with a sale of a main res­i­dence and the pur­chase of a new main res­i­dence, com­plet­ing on the same day, as the sur­charge will not ap­ply.

If, due to de­lays in the con­veyanc­ing process, the pur­chase pro­ceeds to com­ple­tion be­fore the sale of the in­di­vid­ual’s main res­i­dence, the trans­ac­tion is sub- ject to the higher rate but a re­fund is avail­able if the pre­vi­ous main res­i­dence is sold within three years.

The re­fund payable is the dif­fer­ence be­tween the amount of SDLT paid un­der the higher rates and the amount of SDLT that would have been due un­der the nor­mal res­i­den­tial rates.

It is more com­pli­cated when deal­ing with joint own­ers, with at least one al­ready own­ing a prop­erty and them be­ing mar­ried or in a civil part­ner­ship or not.

Each joint pur­chaser must be as­sessed sep­a­rately to see if the sur­charge would ap­ply. If it ap­plies to ei­ther party, then the sur­charge ap­plies to the whole of the trans­ac­tion.

Un­mar­ried cou­ples pur­chas­ing a prop­erty jointly as a main res­i­dence with one party al­ready an owner of a rental prop­erty and one a first time buyer, are li­able to pay the sur­charge on the to­tal pur­chase price as, on com­ple­tion, the cou­ple will own an in­ter- est in an ad­di­tional res­i­den­tial prop­erty.

Where an un­mar­ried cou­ple each own a res­i­den­tial prop­erty, one of which they both live in, the other be­ing rented out and the one they live in is sold and the rented prop­erty re­tained, the higher rate will ap­ply as they are not mar­ried (or in a civil part­ner­ship).

The in­di­vid­ual with the rental prop­erty will not be treated as re­plac­ing his main res­i­dence as, even though he has been liv­ing in the prop­erty be­ing sold, he has no in­ter­est in this prop­erty.

It is some­what dif­fer­ent for mar­ried cou­ples as they are treated as joint pur­chasers of a new prop­erty.

There­fore, any other prop­erty owned by ei­ther spouse will be taken into ac­count when de­ter­min­ing whether the higher rate ap­plies.

In the same sce­nario as the un­mar­ried cou­ple above, the higher rate does not ap­ply to the mar­ried cou­ple as they are mar­ried and have both lived in the prop­erty be­ing sold as their main res­i­dence so they will both be treated as re­plac­ing their main res­i­dence.

Your solic­i­tor will ask you var­i­ous ques­tions re­gard­ing the na­ture of the trans­ac­tion that you are propos­ing, for ex­am­ple; whether you (or any joint pur­chaser) will own more than one res­i­den­tial prop­erty upon com­ple­tion of the trans­ac­tion, your mar­i­tal sta­tus and whether the prop­erty to be pur­chased will be a main res­i­dence and re­plac­ing a pre­vi­ous main res­i­dence (in sit­u­a­tions where more than one prop­erty will be owned on com­ple­tion) to as­sess your li­a­bil­ity for stamp duty.

Penal­ties for in­cor­rect fil­ing of re­turns are puni­tive so it is essen­tial that you re­lay the cor­rect in­for­ma­tion to your solic­i­tor.

Ev­ery­one pur­chas­ing a new prop­erty or land over a cer­tain value has to pay SDLT

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