How can you currently own a buy to let and not pay Higher Stamp Duty Land Tax?

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Higher Stamp Duty Land Tax – the scenario

One of our clients, Mr R, owns a single property that is currently let. Mr R. will not be selling the existing property when he purchases a new home.

This makes the new purchase subject to £10,500 in Higher Stamp Duty Land Tax (an extra 3% on the bill).

Mr R. was expecting to sell the currently owned property within three years to then claim back the Higher Stamp Duty Land Tax.

However, the facility to claim back Higher Stamp Duty Land Tax is an allowance based on the taxpayer replacing a ‘main residence’.

In this case Mr R. is not resident in the property that he currently owns. Where does that leave him in claiming back the Higher Stamp Duty Land Tax?

Mr R. did not know, his solicitors were less then useful, telling us ‘I believe that the window for selling the property is 18 months rather than 3 years’.

So we went direct to the ‘horse’s mouth’

Our source document

HM Revenue and Customs | Stamp Duty Land Tax: higher rates for purchases of additional residential properties | Guidance Note 16 March 2016

It took us a while to find what we were looking for, but we eventually seem to have found the key passage that Mr R. wanted to hear.

Paragraph 3.25

‘There is a replacement of a main residence if, at the time of a purchase, the transaction was a higher rates transaction and in the subsequent three years, the purchaser sells a previous main residence. The previous main residence must have been the main residence of the purchaser at some time during the three years before the purchase of the new main residence.’

Conclusion

Mr R. client has lived in the buy to let in the three years before the proposed date of the new purchase. He intends to sell the original property within a three year period after the new purchase.

Mr R. client appears to meet the criteria to claim back the Higher Stamp Duty Land Tax even though the property he will dispose of is currently a ‘buy to let’.*

*You should not use this article as a guide to your own tax position and every purchaser should rely on their own legal representation to advise them correctly on SDLT legislation.

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