The headline-grabbing change to Stamp Duty Land Tax in last week’s Budget brought relief for first-time buyers.
However, Chancellor Philip Hammond also introduced several minor amendments to rectify the unintended consequences of the higher rates for additional properties brought in following the November 2015 Budget.
One of the quirks of the higher rates was that, where a divorce-related court order states that one spouse is to stay in the jointly-owned matrimonial home and the other seeks to buy a new property, the latter will attract the higher rates if the new home costs more than £40,000. This was seen as unfair and effectively acted as a punishment for the spouse buying the new property.
The Treasury has now closed this loophole so that divorcing couples in this position are not subject to the higher rates. The wording of this measure in the Budget implies that a court order will be needed for the exemption to apply, as informal arrangements may not be sufficient.
The Treasury has also moved to close another loophole. This is where a buyer transfers a small share in their property (and therefore transferring a “major interest” as per the higher rates rules) to their spouse to avoid the higher rates being charged on the additional property. Instead, the buyer must transfer the whole of their interest to someone other than their spouse to benefit from the replacement main residence relief.
The changes announced by the Treasury also include an exemption where an individual buys a property from their spouse or civil partner. Changes have also been made where a child’s parents buy a property under powers granted by an order made by the Court of Protection
However, the Treasury or HM Revenue & Customs have not provided final guidance notes relating to the new rules and some questions remain. For example, in a case where someone buys a property from their spouse or civil partner, it is not clear whether the property has to be the individual’s main residence or if the purchase price has to be for the market value of the property.
Until final guidance notes are issued, it is not clear whether the proposed new rules will be passed by Parliament or will be altered further.
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