Could loophole mean no stamp duty surcharge for second homes?

News Article

A complex loophole – as yet untested in the courts – could potentially mean that couples looking to purchase a second home, may be able to avoid stamp duty surcharges.

The potential get-out, disclosed by Telegraph Money, suggests that if a couple lives in their new property, but keeps their old home as a buy-to-let – they might be able to avoid thousands of pounds in additional stamp duty.

Experts are now studying the fine print of guidance issued by HM Revenue & Customs and are claiming there may possibly be room for manoeuvre depending on the definition of a “major interest” in a property, which is key to the surcharge.

The three per cent stamp duty surcharge was introduced in 2016 and affects anyone buying a residential property who already owns a “major interest” in another.

Most people purchase a home together as joint tenants which means they both have a right to the entire estate and one half of the property passes to the other when one party dies.

If two homeowners wish to have unequal shares or want to pass their share to another person in their Will, they must be ‘tenants in common’.

In theory, if a married couple owns unequal shares as tenants in common they might be able to avoid the surcharge if they wanted to make another property purchase but keep their existing home. The new home would need to be used as their main residence but they could potentially rent out their former home as a buy-to-let.

Nicola Tubbs, an Associate Executive and residential property expert with Palmers, explained: “The potential loophole is extremely complex and it is important to state that it is as yet untested in the courts.

“It does, however, raise important questions regarding the validity of HMRC guidelines and their interpretation of a “major interest” in a property.

“Sadly for the average homeowner, the substantial costs involved in taking HMRC to court to test the legality of their guidance, would far outweigh the potential savings in stamp duty surcharges. It may however, be just a matter of time before a case is brought so, watch this space!”

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