In his Budget on 22 November 2017, the Chancellor, Philip Hammond, announced what was hoped would be a reprieve for divorcing couples faced with higher stamp duty charges on their purchase.
Since George Osbourne’s budget in March 2016, anyone looking to purchase a second residential property would be hit with a 3% surcharge on top of the usual stamp duty rate. As well as raising revenue for the Government, the thinking was that this would also provide a much needed boost to the housing market by discouraging the purchase of buy to let property.
An obvious casualty of this change was the individual who’d separated from their former spouse and were looking to purchase prior to the sale or transfer of their marital home. That second purchase would be subject to the surcharge and the additional 3% stamp duty charge.
A purchase for £500,000 which would have normally incurred stamp duty of £15,000 was seeing the total stamp duty payable double to £30,000. If the family home was later sold or transferred the payer would be able to claim a refund on the additional tax paid, although it would quite often create cashflow difficulties and add an additional complication to negotiations. The refunded surcharge would form part of the asset pool in certain circumstances. In others there might not be any refund.
Philip Hammond’s budget sought to do away with this problem, providing couples in this situation with a relief from the additional rate. It has been suggested that a formal order might be required to achieve the exemption, however this may not make the situation any more straightforward.
If the exemption is only going to be available to those able to obtain an order from the court, the surcharge will still be payable for the majority of separated individuals looking to purchase either prior to or during settlement negotiations.
Orders severing an individual’s interest with a property are generally only made at the end of the case and in the context of other provisions. Although provision does exist for an interim sale under FPR r20.2, this is seldom ever used and there is available mechanism to obtain an order for an interim transfer.
The announced change could well help those where a final order has already been made and provision is included for a Mesher-style order involving the delayed sale or transfer of the family home. Until we know more, I would suggest we hold judgment on the impact for those where a final order has not been made.
Andrew Barton is a partner in the family law team specialising in financial division on division. To discuss this topic or any other divorce issues contact Andrew, please call 01392 210700 or email firstname.lastname@example.org