Updating post from Reddit.
Hello,
I am facing a unique situation. I have not found any similar instances on the internet. I jointly own along with my spouse a house abroad worth around £68,000. (Our individual share is £34,000). We still own the house and earn rent on it. I am planning to buy a home in England worth £410,000, again jointly with my spouse. Do I get exemption from paying higher rate of SDLT because our individual share in the property that we own abroad is less than £40,000?
So the issue is whether you can split the value of the foreign property between you and your wife to stay below the £40k threshold?
Have you tried contacting the Stamp Duty Land Tax team of HMRC? That's the advice given in the link below:
SDLT rate when owning a low value property abroad - Community Forum - GOV.UK
Yes that is the issue. I have seen the above link but hmrc admin has not replied to it.
You can call them, the contact details are in the link I posted
https://www.gov.uk/government/organisations/hm-revenue-customs/contact/stamp-duty-land-
I contacted them. What I got was a robotic recitation of the guidelines that were available online anyway. The suggestion was that the ownership shares cannot be split between us as we are married. When asked point blank the person on the other end said she can't confirm or deny whether we have to pay the additional rate!
Wow shocking! Maybe ask the opinion of a conveyancing solicitor?
I would think you are exempted from the higher rates, but I would seek tax advice from an accountant.
The Aditional Rate SDLT regime is in 4ZA of the Finance Act. (https://www.legislation.gov.uk/ukpga/2003/14/schedule/4ZA)
First look at Pt2, 2(3):
In the case of a transaction where there are two or more purchasers—
(a)take one of the purchasers and determine, having regard to that purchaser only [emphasis mine], whether the transaction falls within any of paragraphs 3 to 7, and
(b)do the same with each of the other purchasers.
If the transaction falls within any of those paragraphs when having regard to any one of the purchasers it is a “higher rates transaction” (otherwise it is not).
I think that makes clear that dispite you being spouses, you are each assessed invidually for the purposes of the additional rate.
You would then each be relying on not meeting Condition C, which is at Pt2, 3(4) of the Act:
Condition C is that at the end of the day that is the effective date of the transaction—
(a)the purchaser has a major interest in a dwelling other than the purchased dwelling,
(b)that interest has a market value of £40,000
Which means that your new main residence would not be an Additional Rate Transaction
It is also worth having a look at the guidance in this HMRC Internal Manual: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09780
There is also discussion about spouses and higher rates transactions on this Internal Manual: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09820 aulthough I dont think it really applies to your situation.
Again, a good accountant should not charge much for this advice, and it will be usefull if it is every queried by HMRC (which is unlikley).
The advice I got from the SLDT team at HMRC was that this splitting of share doesn't apply to married couples.
Interesting. I wonder what part of the act says that, as I couldn't see anything related to spouses in the Condition C part. Is there any chance an agent in Spain would value the property under the £40,000 limit?
Replying to this one and tagging /u/Newguyred7 so you both see it. The following link is a blog post by a solicitor that is the primary advisor for SDLT at the firm and participated in the consultation process in developing the legislation and guidance. Specifically, example number 2 Adam and Eve is this exact situation and very clearly he argues it'd be exempt from the higher rate.
https://www.blakemorgan.co.uk/sdlt-surcharge-on-additional-residential-properties-updated-guidance/
I feel vindicated. I also have a sneaking suspicion that HMRC will err on the side of paying them more if they are unsure.
I don't think HMRC would pursue it. The legislation is clear. It's more likely that the phone monkey just didn't understand the scenario. The people that pursue dodged taxes know quite a bit more.
Thanks a lot. This is really helpful. I'll try to get some professional advice
Just get Blake Morgan to do the conveyancing haha
Yours is a complex query. I doubt the phone monkey adequately understood the situation. I'd like to see her cite the law where it says married couples are treated differently there.
I agree with /u/Lucassssssss assessment. Cite it to the SDLT team and get them to cite the authority that overrides the statute.
Contacted John Shallcross at Blake Morgan. He is absolutely sure that my case like Adam and Eve's does not attract higher rate SDLT as the value of the property is divided between us both.
Brilliant mate glad that's cleared up and in your favour.
Thanks a lot for the advice. This forum has saved me £20,500
Do I get a share of that? You could at least buy me a Nando's. :P
That's an interesting question. My gut says a purchase would be considered an additional property, so you will pay the higher rate of SDLT. This amount will be refunded if you sell the other property.
However - I don't know for sure. Please return here with the answer if you find out.
Incorrect. See example 2: https://www.blakemorgan.co.uk/sdlt-surcharge-on-additional-residential-properties-updated-guidance/