The Daily Telegraph - Saturday - Money
‘I was handed £79,500 stamp duty bill after my divorce’
Stamp duty rules are penalising those couples who keep their split cordial, discovers Sam Meadows
Couples who divorce amicably are being disadvantaged by Britain’s complex stamp duty regime, warn tax and marriage experts. Stamp duty was sharply increased in April 2016 for buyers who already owned a property or part of a property. An extra three percentage points would apply on top of the standard rates of stamp duty.
Although designed to target landlords, many divorcing couples found themselves caught out when one party came to buy a new property. A husband who wished to buy again but retain a stake in the marital home, in which his former wife and children remained, is one example.
The November Budget included a special measure to help such people, giving exemption to the higher rate of duty where specific court orders related to the existing marital home. But this means couples who do not go to court still lose out.
Kate Daly, co-founder of Amicable, a firm that specialises in non-court divorces, said the policy needlessly discriminated against this group.
“You don’t need to go to court or pay a solicitor if you want to divorce,” she said. “We are delighted by the change announced in the Budget, because the surcharge wasn’t intended to target divorcing couples.
“But the legislation is unclear. I just don’t see the necessity of having a court order. A lot of people can’t afford to have one drawn up.”
A spokesman for HM Revenue & Customs confirmed that the exemption applied only to couples with a “property adjustment order” concerning the marital home. Those without will be left out of pocket.
Divorce specialist Rebecca Taylor, of Aurea Financial Planning, agreed that the policy unfairly affected those who did not wish to go to court.
“Most separating couples want to avoid going to court if they can,” she said. “At the moment the only way these couples can avoid the surcharge is by getting divorced and then neatly selling their share of the house to their ex-partner. That just doesn’t happen in real life.”
Having to pay the surcharge can more than double the tax bill on a purchase as the additional three percentage points are charged on the value above £40,000. For example, a buyer of a £300,000 property would pay £5,000 in duty without the surcharge but £14,000 with it.
Caroline Le Jeune, a tax specialist at accountants Blick Rothenberg, said: “These rules seem unnecessarily penal and may trigger additional costs for a separating couple at a point when finances are stretched.”
Also disadvantaged are those who have gone through a divorce since the surcharge was introduced. The HMRC spokesman confirmed that
‘The law is trying to say you can’t have an amicable divorce and get on with your life’
the amendment would not apply retrospectively, meaning none of those who had previously overpaid would be refunded.
Among this group is Neal Gandhi, 50, who began divorce proceedings with his ex-wife two years ago.
Preferring not to go to court and place additional stress on their two young children, the pair came to a private financial agreement, which included Mr Gandhi’s ex-wife living in the family home.
He bought a home with his new partner in January 2017 without paying the surcharge, which he believed did not apply to him. Then in October, shortly before the policy was amended, HMRC wrote to him demanding the £79,500 in unpaid duty.
Mr Ghandi said he had signed a divorce petition and was buying with a new partner so he felt it was clear he had no interest in the former marital home.
“It strikes me that the law is trying to say you can’t have an amicable divorce and get on with your life,” he said. “They are going after the wrong people.”