HMRC SDLT: SDLTM09812 – SDLT – higher rates for additional dwellings: Meaning of ‘main residence’

SDLT Higher Rates for Additional Dwellings: Main Residence Definition

This section of the HMRC internal manual explains the principles and concepts related to the higher rates of Stamp Duty Land Tax (SDLT) for additional dwellings, focusing on the definition of ‘main residence’. It provides guidance on determining the main residence for tax purposes.

Definition of ‘main residence’ for SDLT purposes.
Criteria for identifying a main residence.
Implications of owning multiple properties.
Guidance on tax liability and exemptions.

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Read the original guidance here:
HMRC SDLT: SDLTM09812 – SDLT – higher rates for additional dwellings: Meaning of ‘main residence’

Meaning of ‘Main Residence’ in SDLT Higher Rates for Additional Dwellings

Understanding Condition D

When discussing the higher rates for Stamp Duty Land Tax (SDLT) on additional homes, it’s important to understand what is meant by replacing a ‘main residence’ under Condition D. For a property to qualify as a replacement, a few conditions must be met:

– The old property must be sold or disposed of.
– The old property must have been owned by the person buying the new property or by their spouse or civil partner.
– It also needs to have been their main residence during the time they owned it, as explained in SDLTM09800.

If someone once lived in a place that they or their spouse/civil partner did not own, simply moving out does not count as replacing their main residence for Condition D.

Residences: One or More?

If a person lives in only one dwelling, that dwelling is their only main residence. However, things can get complicated when a person has more than one home. In these cases, various factors need to be examined to determine which residence is the main one.

– The rules don’t allow an individual to simply choose which property they consider their main residence.

Also, just because someone spends more time in one house doesn’t necessarily mean it’s their main residence.

Case Study: Frost v Feltham

In the case of Frost v Feltham (55TC10), the High Court clarified how to assess which property is the main residence. The judge, Nourse J, pointed out that your main residence isn’t just about how you split your time between homes.

Factors to Consider

Here are important points that can help identify a person’s main residence:

– Where does the family spend most of their time, particularly if the person is married or in a civil partnership?
– If there are children involved, which property do they attend school from?
– At which address is the individual registered to vote?
– Where does the person work?
– How is each residence furnished?
– Which address do they use for receiving correspondence?
– Where is the individual registered with a doctor or dentist?
– At which address is the individual’s vehicle registered and insured?
– Which property is listed as the main residence for council tax?

Simply living in a property doesn’t automatically mean it’s considered the main residence. There must be a sense of permanence and an expectation that the living situation will continue for the property to be recognised as a main residence.

Tests for Old and New Dwellings

There are two key tests used to understand if a property meets the requirements for Condition D:

1. Test for the Old Dwelling: This test examines whether the previous residence was at one time the only or main home of the person who sold it. It looks at objective facts about the individual’s living situation.

2. Test for the New Dwelling: This test focuses on the purchaser’s intentions. Did the person intend for the new property to be their only or main residence? This assessment is based on what the buyer intended at the time of purchase.

– If the buyer plans to live in the new home right away, that satisfies the intention test. However, plans involving some changes or repairs before moving in do not exclude it from being considered a main residence.

– If the new property is meant to be rented out or generate income, then it likely won’t meet the intention requirement.

In rare situations, the buyer’s genuine intentions at the time of purchase can be affected by unforeseen events.

Who Must Own the Properties?

For Condition D to be satisfied, the tests mentioned earlier apply only to properties owned by the person buying the new dwelling or their spouse/civil partner.

Understanding these tests and considerations can help clarify whether a property qualifies as a main residence under SDLT regulations.

Common Questions

What if I live in my parents’ house but I don’t own it?

Moving out of your parents’ home doesn’t count as selling your main residence if you do not own that property. For SDLT purposes, your main residence must be a property that you own.

I have two homes, how do I choose my main residence?

It’s not about choosing; it’s about considering a range of factors. You need to evaluate all aspects of your living situation to see which property meets more of the criteria outlined earlier.

Is the main residence where I spend the most time?

Not necessarily. While you might spend more time in one home, you have to look at other factors, such as where your family spends time or where your job is located.

If I intend to live in my new property, does that automatically make it my main residence?

Your intention is essential, but it also depends on the overall context in which you’re using the property. If your main intention is to rent it out or use it for purposes other than living, it will not qualify as your main residence.

Wrap-Up

Understanding the definition of a main residence in relation to SDLT is important for homeowners and prospective buyers. There are clear criteria and tests in place to establish your main residence, ensuring that anyone looking to buy a property is aware of their responsibilities regarding Stamp Duty Land Tax.