Mark McLaughlin highlights an occasion when establishing if a dwelling is an individual’s main residence is important for stamp duty land tax purposes.
Stamp duty land tax (SDLT) rates (or equivalent in Scotland and Wales, which are not considered here) on residential property can be a significant cost for homeowners; moreso if higher SDLT rates apply to additional dwellings.
Replacement dwelling?
However, the purchase of a qualifying replacement dwelling is not liable to the higher SDLT rates. One of the conditions for the higher SDLT rates is that the purchased dwelling is not a replacement for the purchaser’s only or main residence (FA 2003, Sch 4ZA, para 3(6)).
The purchased dwelling is a ‘replacement’ if (among other things), on the effective date of the transaction, the purchaser intends the dwelling to be their only or main residence.
It will generally be straightforward to establish that this condition is satisfied if the individual resides at only one dwelling. However, difficulties sometimes arise when an individual resides at more than one dwelling. Unlike for capital gains tax (CGT) private residence relief purposes, the SDLT rules do not allow individuals to nominate which dwelling is their main residence.
Main residence factors
HM Revenue and Customs (HMRC) considers that the following (non-exhaustive) list of factors may be useful in establishing which residence is an individual’s only or main residence (see HMRC’s Stamp Duty Land Tax Manual at SDLTM09812):
- If married (or in a civil partnership), where does the family spend its time?
- Where do the children go to school (if applicable)?
- At which residence is the individual registered to vote?
- Where is the individual’s place of work?
- How is each residence furnished?
- Which address is used for correspondence?
- Where is the individual registered with a doctor or dentist?
- At which address is the individual’s car registered and insured?
- Which address is the main residence for council tax?
Looking ahead
For the new dwelling, the test is whether the purchaser intends the dwelling to be their only or main residence (i.e., why did the purchaser acquire the property?).
For example, in Cohen v Revenue and Customs [2023] UKFTT 90 (TC), on 23 July 2018, the appellant purchased a residential property (SR) in London. Renovation works took place between 23 July 2018 and 28 August 2018. The appellant moved into SR on 29 August 2018 for ten days; he slept there, moved his clothes in, and entertained friends there. However, the appellant wished to live elsewhere. He decided before moving into SR to sell it and buy a new flat (LC) in Loughton.
The appellant sold SR on 25 October 2018. He completed the purchase of LC on 30 October 2018. HMRC sought to charge higher-rate SDLT on the appellant’s purchase of LC. The FTT held that the very short period the appellant lived at SR was indicative that his occupation was temporary. In addition, the appellant did not intend to live at SR permanently. Finally, the appellant only lived at SR for ten days from 29 August 2018, whereas the purchase of LC completed on 30 October 2018.
Practical tip
Like CGT private residence relief (and as illustrated in Cohen), merely occupying a property will not in itself make it a main residence. HMRC considers that there needs to be a permanence and expectation of continuity to the occupation to establish it as a main residence.
