Is this a legal way to avoid the 3% Stamp Duty on a 2nd Purchase?

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    Is this a legal way to avoid the 3% Stamp Duty on a 2nd Purchase?

    Hello,

    I own a flat that I currently live in and I am looking to buy another flat in another city closer to my girlfriend.

    I would be looking to rent out my current flat (we'll call Flat A), and buy a cheap flat (Flat B). Flat B will only have a value of £50k, so as to minimise any stamp duty to be paid (approximately £1500 in additional stamp duty for a £50k flat). This Flat B would become my main residence for a few weeks while I did it up and Flat A would be moved to a buy to let. Then I would sell this Flat B and buy another flat, Flat C, which has a value of £300,000. Since I am replacing Flat B as my main residence for Flat C, I don't need to pay any additional stamp duty for a 2nd home, thus saving £9,000, because no additional stamp duty needs to be paid when you replace your main residence for a new main residence. My local estate agent, who is also a solicitor, says this is fine to do. I'd quite like a second opinion. Does anyone see any problem with this?

    Thanks!

    #2
    I think your solicitor is wrong. You will need to pay the additional 3% on when purchasing Flat B which would be refundable if you sell Flat A within 3 years. Likewise if you still own Flat A when you sell Flat B and buy Flat C you will need to pay the additional SDLT

    Comment


      #3
      IT works in theory as you describe it and I disagree with pebbles above. You don't pay the additional SDLT if you are replacing your main residence, regardless of owning other investment properties. However if you really manage to flip flat B in a very short period of time then HMRC could quite easily argue it was never your intention to make it your permanent home or main residence and that (as you in fact are) were attempting to avoid the much higher SDLT on Flat C which you always intended to end up in.

      This sounds like a huge amount of hassle to try and save what may well end up being sub £5k when all transaction costs are concerned. Which in the scheme of things isn't very much when you're talking about owning a £300k property with another BTL in your pocket as well. I wouldn't risk running into problems with HMRC for that amount of money. If you really need to save that amount you're probably stretching yourself too far financially anyway. If you don't IMO it's not worth the hassle.

      Comment


        #4
        Buying a place, doing it up and selling it is treated as a business activity (i.e. the property isn't a residence).
        Any gain is income for tax purposes as a consequence - even if you live there while doing it up.
        HMRC will want to / have to be consistent.
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          My understanding is the same as pebblepebble

          Comment


            #6
            If you already own a residential property under your name , there is no legal way to avoid the 3% extra sdlt .because your conveyancing solicitor will demand payment before you can register in your name. Ask you solicitor before you give instruction to proceed.

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