The last Conservative Budget of George Osborne introduced further and additional Stamp Duty which was designed to affect second homes and where a main residence may have been acquired without disposing of the original residence.
As regards the latter, there are essentially two parts to replacement of a purchaser’s main residence, namely:-
There must be a disposal of the purchaser’s or their spouse’s or civil partner’s previous residence; and
The dwelling acquired must be intended to be occupied as the individual’s only or main residence. It is interesting to note that the disposal of the previous main residence does not have to be by way of sale, although that is likely to be the case for most individuals.
There is deemed to be a replacement of a main residence if in the three years ending with the purchase, the purchaser disposed of a major interest in another dwelling and that other dwelling was at some time in the 3-year period the only or main residence of the purchaser. In addition, there is also deemed to be a replacement of a main residence if in the three years ending with the purchase, the purchaser’s spouse or civil partner disposed of a major interest in another dwelling and that other dwelling was at some time in the 3-year period the only or main residence of the purchaser. For the purposes of determining a main residence the following rules apply, namely:-
The dwelling disposed of is the purchaser’s only or main residence at some time during the period of three years before the purchase. In cases where an individual resides at only one dwelling, that will be their only or main residence.
Where an individual resides at more than one dwelling, all the facts and circumstances of the particular case must be considered in order to conclude which residence is the main residence. The main residence is not necessarily the residence where the individual spends the majority of their time, although it commonly will be.
Broadly speaking, where individuals are concerned the interest will be treated as being owned by an individual where that individual has an absolute beneficial ownership of an interest in land, but legal ownership is held by another person (as in a bare trust or nominee arrangement). This principle will also apply where the beneficiary of a trust would be absolutely entitled but for being under age or disabled in a way that prevents them from being legal capable of owning a property.
In the case of joint purchasers, married couples and civil partners, special rules apply where a transaction is entered into by joint purchasers the higher rates will apply if the transaction would be a higher rate transaction for any of the purchasers considered individually. Consequently, if there are two individual purchasers the transaction will likely be charged at the higher rates. It would be appreciated from the aforementioned that the position is not clear in many cases and consequently where clients are moving home but retaining their original property for any particular reason, advice should be sought from their respective solicitors/accountants in order to ensure that higher rates of tax may be avoided if possible.