Moving house – practical tax problem #1

My sister-in-law (let’s call her Penelope for the purposes of this blog) is due to move to her dream home in the Yorkshire Dales at the end of this month (Friday 28th April).

She has agreed to pay £352,500 for the cottage.

Unfortunately Penelope needs to sell her current house first and her prospective buyers pulled out of the deal on Friday.

Unless she can find a new buyer quickly, Penelope will have to find another source of funds to pay for her new home.

Penelope will also have to pay additional Stamp Duty Land Tax (SDLT) on the purchase because she will own two residential properties at the same time. Although the SDLT can be reclaimed once the old home has been sold, it does increase the amount of cash that has to be raised now if she is not to lose the cottage.

REQUIRED

a) CALCULATE the SDLT  payable on the purchase of the cottage if  Penelope is able to sell her current house in time.

b) If Penelope is not able to sell her old house in time:

i) CALCULATE the additional SDLT payable on the purchase of the cottage.

ii) STATE the date by which Penelope must sell her old house if she wishes to recover this additional SDLT.

iii) STATE the time limit for submitting the claim to HMRC to recover the additional SDLT.

Details of the SDLT rates are on pages 129-130 of Bloomsbury’s Tax Rates and Tables 2016-17, Finance Act edition

You will find some general guidance from HMRC  here.

I will look at the tax issues involved in raising the finance for the cottage in later posts.

 

 

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