HMRC SDLT: SDLTM09797 – SDLT – higher rates for additional dwellings: Condition C – divorce and civil partnership dissolution

SDLT Higher Rates for Additional Dwellings: Condition C

This section of the HMRC internal manual discusses the application of higher rates of Stamp Duty Land Tax (SDLT) for additional dwellings, specifically focusing on Condition C related to divorce and civil partnership dissolution.

• Explains the criteria for higher SDLT rates on additional properties.
• Details how divorce and dissolution of civil partnerships affect SDLT liabilities.
• Provides guidance on exemptions and conditions under Condition C.
• Clarifies the implications for property ownership changes post-divorce or dissolution.

SDLT – Higher Rates for Additional Dwellings: Condition C – Divorce and Civil Partnership Dissolution

Overview of Condition C

When someone goes through a divorce or civil partnership dissolution, there are situations where they may need to keep an interest in a former home as part of a court order. Before 21 November 2017, having such an interest was important when looking into whether someone needed to pay higher Stamp Duty Land Tax (SDLT) rates on a new property they wanted to buy. But since 22 November 2017, certain conditions mean that an interest in a former home may not be taken into account for these higher rates.

Key Principles of Ignoring a Major Interest

From 22 November 2017, if someone is buying a property and holds a major interest in another property, this interest will be ignored for higher rates if:

– The property they are buying is not their only or main residence.
– The former property is someone else’s only or main residence.
– There is a court order in place concerning the property that benefits that other person.

Understanding Court Orders Involved

For the rule to apply, the court order affecting the person’s interest must fall under specific legislative provisions. The relevant court orders are:

– Under section 24(1)(b) of the Matrimonial Causes Act 1973 (this covers property adjustment orders made during divorce proceedings).
– Under section 17(1)(a)(ii) of the Matrimonial and Family Proceedings Act 1984 (covers similar property adjustment orders made after an overseas divorce).
– Under Article 26(1)(b) of the Matrimonial Causes (Northern Ireland) Order 1978 (applies to property adjustment orders in the context of divorce proceedings in Northern Ireland).
– Under Article 21(a)(ii) of the Matrimonial and Family Proceedings (Northern Ireland) Order 1989 (similar orders applicable to overseas divorces in Northern Ireland).
– Under paragraph 7(1)(b) of Schedule 5 or Schedule 15 of the Civil Partnership Act 2004 (covers property adjustment orders made in relation to civil partnership dissolutions).
– Under paragraph 9 of Schedule 7 or Schedule 17 of the Civil Partnership Act 2004 (covers orders related to overseas dissolutions of civil partnerships).

Consent Orders and Property Adjustment

When a couple decides to settle their divorce or the dissolution of their civil partnership amicably, they often formalise their agreement by applying for a Consent Order through the court. This order can cover the same matters that would be addressed in a Property Adjustment Order and will satisfy the necessary requirements for ignoring an interest in a previous home for SDLT purposes.

Examples Illustrating the Condition

Example One: Rachael and Michaela

Rachael and Michaela have been in a civil partnership for seven years. They have two children and decide to separate, wanting to officially end their partnership. They negotiate a settlement through their lawyers and apply for a court property adjustment order. This court order allows Rachael to continue living in their home until their youngest child turns 18 or until she gets married or forms a new civil partnership. They successfully obtain a property adjustment order under paragraph 7(1)(b) of Schedule 5 to the Civil Partnership Act 2004.

Subsequently, Michaela decides to buy a new home to live in as her primary residence. Even though she still holds an interest in the former marital home, when it comes to buying her new property, her interest in the old home is ignored. As a result, she will not have to pay the higher SDLT rates on her new purchase.

Example Two: James and Deborah

James and Deborah have been married for two years but have now separated. They decide to handle their divorce in a friendly manner, agreeing that James will stay in the marital home with their children until the youngest child turns 18 or until James remarries. Although they could seek a property adjustment order under section 24(1)(b) of the Matrimonial Causes Act 1973, they opt instead to apply for a consent order to formalise their agreement.

After this arrangement is in place, Deborah goes on to purchase a new home, which will be her main residence. Similar to Michaela’s situation, even though Deborah has an interest in the former marital home, this interest will not be factored in when determining if she has to pay higher SDLT rates on her new property.

Summary of Implications for SDLT

– The new legislation affects individuals going through divorce or civil partnership dissolution.
– Court orders, particularly property adjustment orders, play a significant role in determining if a former home interest can be ignored for SDLT purposes.
– Couples can use consent orders to formalise agreements, which can also provide the benefit of ignoring former property interests.

These examples highlight how conditions set out in SDLT law can affect individuals’ obligations when buying new properties during significant life changes like divorce or the dissolution of a civil partnership. It’s important for anyone facing such circumstances to understand these rules to navigate property purchases and possible SDLT liabilities effectively.

For further guidance on SDLT rules and how they relate to divorce and civil partnership dissolution, visit SDLT – higher rates for additional dwellings: Condition C – divorce and civil partnership dissolution.

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