Relief for SDLT 3% surcharge for only or main residence
The relief is not as simple as it might first appear, writes Ann L Humphrey, solicitor and tax specialist.
It seems to me that there are a number of unnecessarily tortuous provisions in FA 2003 Sch 4ZA. One of them is the relief from the surcharge where the additional dwelling is a replacement for an individual’s ‘only or main residence’ (OMR).
Sounds simple, doesn’t it? Well, it isn’t.
As a reminder for those of you who have found it more productive to bang your head against the closed doors of your local tax office than to spend hours staring at this stuff, the relief has four conditions. These conditions are slightly different depending on whether the OMR is disposed of before or after the acquisition of a new one. Where the disposal occurs first the conditions are, using the language of para 3(6) of Sch 4ZA:
On the effective date of the purchase, the’ purchaser’ intends the ‘purchased dwelling’ to be his OMR;
The purchaser (or his spouse or civil partner at that time) has disposed of a major interest in another dwelling (the ‘sold dwelling’) within three years of the effective date of the purchase;
That sold dwelling was at any time during that three-year period the purchaser’s OMR; and
At no time since the effective date of the disposal of the sold dwelling has the purchaser (or his spouse or civil partner) acquired a major interest (or its equivalent) in another dwelling with the intention of it being his OMR.
Of course as this is tax legislation we are looking at, the use of the words ‘purchaser’ and ‘sold’ doesn’t mean that there has to be a purchase or a sale. All that is needed is an acquisition of a chargeable interest, in which case the person who has acquired that interest is a ‘purchaser’ provided that that person has either given consideration for, or is a party to, the transaction.
Oh, and then there are the transitional rules which apply only where the disposal occurs before the acquisition and only where the acquisition happens on or before 26 November 2018. These rules remove the three year limit from the second and third conditions.
Oh, and where only one spouse or civil partner is the purchaser each of the four conditions have to be satisfied by the other as well. This means that although a disposal of an OMR by the purchaser’s spouse or civil partner counts (condition 2) that dwelling must have been the purchaser’s OMR (condition 3). In other words, it is not enough that the dwelling was the purchaser’s spouse’s or civil partner’s OMR.
Oh, and the relief does not apply where there is a purchase of more than one dwelling in the same transaction unless the other dwellings are ‘subsidiary’ to a main dwelling.
Why? (Pause, take a calming breath and write down your answer before reading on.)
The requirement for the purchased dwelling to be different to the one which is disposed of can produce some odd results. For example, the transfer of a married couple’s OMR from the ownership of one spouse into joint names would not qualify for relief as the transferee would not be replacing an OMR. This is assuming that HMRC are correct in their view that an undivided share is a ‘major interest’ for the purposes of Sch 4ZA.
Another odd result is that relief would not be available where the lease of an OMR is extended.
Ann L Humphrey, solicitor and tax specialist (edited version of monthly blog at www.annlhumphrey.com/blog)
Home >Articles > Relief for SDLT 3% surcharge for only or main residence
Relief for SDLT 3% surcharge for only or main residence
The relief is not as simple as it might first appear, writes Ann L Humphrey, solicitor and tax specialist.
It seems to me that there are a number of unnecessarily tortuous provisions in FA 2003 Sch 4ZA. One of them is the relief from the surcharge where the additional dwelling is a replacement for an individual’s ‘only or main residence’ (OMR).
Sounds simple, doesn’t it? Well, it isn’t.
As a reminder for those of you who have found it more productive to bang your head against the closed doors of your local tax office than to spend hours staring at this stuff, the relief has four conditions. These conditions are slightly different depending on whether the OMR is disposed of before or after the acquisition of a new one. Where the disposal occurs first the conditions are, using the language of para 3(6) of Sch 4ZA:
On the effective date of the purchase, the’ purchaser’ intends the ‘purchased dwelling’ to be his OMR;
The purchaser (or his spouse or civil partner at that time) has disposed of a major interest in another dwelling (the ‘sold dwelling’) within three years of the effective date of the purchase;
That sold dwelling was at any time during that three-year period the purchaser’s OMR; and
At no time since the effective date of the disposal of the sold dwelling has the purchaser (or his spouse or civil partner) acquired a major interest (or its equivalent) in another dwelling with the intention of it being his OMR.
Of course as this is tax legislation we are looking at, the use of the words ‘purchaser’ and ‘sold’ doesn’t mean that there has to be a purchase or a sale. All that is needed is an acquisition of a chargeable interest, in which case the person who has acquired that interest is a ‘purchaser’ provided that that person has either given consideration for, or is a party to, the transaction.
Oh, and then there are the transitional rules which apply only where the disposal occurs before the acquisition and only where the acquisition happens on or before 26 November 2018. These rules remove the three year limit from the second and third conditions.
Oh, and where only one spouse or civil partner is the purchaser each of the four conditions have to be satisfied by the other as well. This means that although a disposal of an OMR by the purchaser’s spouse or civil partner counts (condition 2) that dwelling must have been the purchaser’s OMR (condition 3). In other words, it is not enough that the dwelling was the purchaser’s spouse’s or civil partner’s OMR.
Oh, and the relief does not apply where there is a purchase of more than one dwelling in the same transaction unless the other dwellings are ‘subsidiary’ to a main dwelling.
Why? (Pause, take a calming breath and write down your answer before reading on.)
The requirement for the purchased dwelling to be different to the one which is disposed of can produce some odd results. For example, the transfer of a married couple’s OMR from the ownership of one spouse into joint names would not qualify for relief as the transferee would not be replacing an OMR. This is assuming that HMRC are correct in their view that an undivided share is a ‘major interest’ for the purposes of Sch 4ZA.
Another odd result is that relief would not be available where the lease of an OMR is extended.
Ann L Humphrey, solicitor and tax specialist (edited version of monthly blog at www.annlhumphrey.com/blog)
