insideKENT Magazine Issue 78 - September 2018 | Page 173
FINANCE
INHERITED
PROPERTY?
WATCH OUT
FOR SDLT STING
LATER ON
BY RICK SCHOFIELD, TAX PARTNER AT WILKINS KENNEDY, ASHFORD
IF YOU INHERIT PROPERTY, THERE IS USUALLY NO STAMP DUTY
LAND TAX (SDLT), UNLESS THE BENEFICIARY IS PAYING MONEY
INTO THE ESTATE OR PAYING OTHER BENEFICIARIES. HOWEVER,
THERE ARE AN INCREASING NUMBER OF PEOPLE GETTING CAUGHT
UP IN AN SDLT ‘TRAP’ WHEN CIRCUMSTANCES RELATING TO THE
INHERITED PROPERTY CHANGE.
The additional 3% SDLT surcharge, which was
introduced back in April 2016, applies to all
additional properties purchased, which are
not replacing a main residence. This also
applies where the property chain has broken
down.
There may be other situations where the
additional surcharge applies, here is one
example to consider.
David and Sarah, who are brother and sister,
have inherited a freehold property in London
from their late father, worth £500,000. They
already own one mortgaged property each,
which are their main residences.
The siblings will pay no additional SDLT on
inheriting their father’s property; however,
Sarah then chooses to sell her half to David.
He agrees, but at the point of handing over
£250,000 for her share, he will also be caught
out by the additional SDLT surcharge. Before
April 2016, the brother would have paid Stamp
Duty of £2,500, but, following the introduction
of the surcharge, he is now liable to pay
£10,000 in SDLT.
The additional 3% surcharge applies because
the brother is already a homeowner. Therefore,
the transaction with his sister would mean
he’d acquired an additional dwelling even
though he has already inherited part of it – in
the same way as if he’d bought a completely
different house.
If David was not a homeowner, he would not
pay the additional surcharge. If he had never
owned property, and was in fact a first time
buyer, he wouldn’t pay any SDLT at all, as the
price he is paying is fully covered by the First
Time Buyer relief. However, if he then chooses
to purchase his own home at a later stage, but
retains his father’s property, he will need to
pay the additional 3% surcharge on the value
of the new home. This is because David will
own a main residence, as well as his father’s
property.
The 3% charge still applies at the point of
David’s new home purchase, even if he
chooses to rent out his father’s property, and
not declare his father’s home as his main
residence. This is because there will be a
second transaction, which will result in David
owning more than one property, and therefore
the charges will apply.
Every situation is different so it is best to seek
advice for your particular circumstances. For
further information, speak to the tax team at
Wilkins Kennedy who will be able to assist.
Local offices:
Ashford: 01233 629 255 / Canterbury: 01227 454 861
Maidstone: 01622 690 666 / Orpington: 01689 827 505
Sandwich: 01304 249 997
[email protected]
www.wilkinskennedy.com
wilkinskennedy
wilkinskennedy
175