Yahoo Finance Budget gives divorced couples exemption on stamp duty surcharge
Divorcing couples who faced paying higher stamp duty rates will be given reprieve in a move that reversed one of the unintended consequences of previous legislation.
Former chancellor George Osborne introduced higher rates of stamp duty to crack down on the buy-to-let market. He imposed a 3 percentage point surcharge on those buying properties in addition to their main home.
While the policy was aimed at landlords, it has had a range of unintended consequences since its implementation in April 2016.
Couples going through a divorce suffered the higher charge in certain circumstances. If a court ordered one spouse to allow their partner to continue living in the jointly-owned family home, for example, that partner would be hit by the additional rate if they bought a new property. This was seen as unfair.
The surcharge can significantly inflate the bill. A transaction worth £500,000 would ordinarily attract a stamp duty bill of £15,000, but if the additional rates apply the tax bill would be £30,000.
In the Budget, Philip Hammond has now moved to curb this loophole, giving couples in this situation a relief from the additional rate. The Budget wording suggests a court order may be required in order for the exemption to apply, informal arrangements between splitting couples may not be enough.
Caroline Le Jeune, a tax partner at Blick Rothenberg, the accountants, said: “This is a redressing of the problems in previous, hastily introduced, legislation. They should really have taken the time to get it right the first time.
“Overall this will be beneficial for people in this situation.”
The Government will also close a loophole, disclosed by Telegraph Money earlier this year, which meant buyers could give a small portion of their property to their spouse and avoid the surcharge.
This was because the buyer could argue they had disposed of a “major interest” in their main residence using the legal definition. Experts argued this potentially meant they would not have to pay the additional rate on the new purchase.
Government papers now say buyers must dispose of their entire property to avoid being liable for the surcharge.
