If parties are to separate probably one of the last things they want to think about is stamp duty. But for the unaware there might be an expensive problem ahead on any future purchase of a property following separation.
The new stamp duty land tax (SDLT) rules will have been with us for 12 months as of 1 April 2017 and yet many people remain entirely unaware how they affect couples who are married or in a civil partnership. It is particularly relevant for those couples who separate and where one spouse wants to move on and buy another property at an early stage.
The new higher rates of SDLT now apply at the rate of 3 % above the standard rates of SDLT on any purchase over £40,000 whether that second property is bought as a home or an investment.
That may seem straightforward but what it is important to understand is that two people in a married couple or civil partnership are treated as one unit for the purposes of working out whether the higher rates of SDLT on the second purchase are payable.
For example if the marital home is held in the name of one spouse and the second spouse decides to buy an investment property in the second spouse’s name, the couple are treated as then owning two properties and the second spouse will pay the higher rate of SDLT on their purchase.
But what happens if the marriage has broken down. Married couples and civil partners are treated as living together (and therefore remain as one unit for the purpose of the higher rates of SDLT) unless they are formally separated under a court order or by a formal deed of separation executed as a deed. The marriage or civil partnership must have truly broken down and it is not sufficient for the couple to be simply living in different properties.
For many couples, particularly those who decide to wait for two years before they file for divorce, they will not have attended to the legalities of their separation before one or other wants to purchase another home. They will continue to be treated as one unit despite having separated and any further purchase will attract the higher rates of SDLT.
For example If the couple are married or in a civil partnership and jointly own their home and they separate and then one spouse decides to purchase a new home whilst their name remains on the deeds to the marital home (which is not being sold) this will constitutes buying a second property and the higher rates of SDLT will apply. However if they subsequently go on to obtain a divorce/dissolution and sell their share of the marital home back to their former spouse within 36 months of completion on the new purchase, HMRC will provide a full refund.