Head of family Teena Dhanota-Jones and senior associate Sarah Richardson ask and answer some of the most common questions relating to divorce and property that clients raise with them.
Question from the matrimonial department to the property department:
Teena Dhanota-Jones: “I have many clients that own more than one property. On occasion, the main home cannot be sold within a reasonable timeframe, and therefore a second home is purchased. The second home will attract the higher rate of stamp duty, which is rather frustrating, albeit the main home is ultimately sold. Are clients able to receive a refund for the payment of the higher rate of stamp duty? If so, how?”
Reply from the property department:
Sarah Richardson: “This is a frequent question from my clients too. Luckily, HM Revenue and Customs (HMRC) has made fair provision for this situation. Provided you sell your main residence (that is, complete and not just exchange contracts) within three years from the date you complete the purchase of the second home, then the additional 3% stamp duty will be refunded to you. It is not a difficult process to apply to HMRC for a refund. From my experience, it takes anything from a fortnight to a month or so for HMRC to pay the refund.
There’s no need to engage a solicitor to make the application, but as they are practised in doing so, it may help speed up the process. All the information regarding the second property purchase will be easily available to the solicitor who handled that purchase too.”
Question from the property department to the matrimonial department:
Sarah Richardson: “My client has just separated from his partner, and they own five investment properties in their respective sole and joint names. They are talking about divorce. However, at this stage, he has instructed me to deal with the transfer of the properties. Is there anything I need to be aware of in relation to implementing this request given the breakdown of the marriage?”
Reply from the matrimonial department:
Teena Dhanota-Jones: “There are a few points to consider here:
1.Transfers between separated spouses before the end of the tax year in which they separate are capital gains tax (CGT) exempt. For example, if parties separate on 1 April 2022, they only have until midnight on 5 April 2022 to transfer assets that may attract CGT.
2. The other point to note is that transfers of property made subject to court orders are stamp duty exempt (sometimes a separation agreement can be sufficient). However, you are never going to be able to transfer properties subject to a court order if the timetable is as set out at 1. above. Even three months could be too short a period to obtain a court order.
3. If one spouse leaves the family home to live elsewhere, the departing spouse may not be able to take advantage of private residence relief if the family home is sold or transferred. The departing spouse’s share may result in a CGT liability.
With the assistance of a tax expert and/or a conveyancer, the parties need to calculate the greater saving, CGT or stamp duty. (The guidance above is not financial advice.)
4.In relation to divorce and the financial claims that arise, while the parties may have agreed a division of the property assets, there may be other assets that are being ignored and, therefore, their agreement may not be the fairest outcome. There are also other financial claims that will need to be addressed, such as maintenance and pensions.”