Q: My client and his wife own a house in Devon and a flat in London. My client stays at the London flat for three/four nights only in working weeks but they made a PPR election nominating the London flat when they purchased it. The Devon property is my client’s family home and they are in the process of selling that property and buying a new home in Devon. Does nominating the London flat as their main residence mean this couple will now pay the additional 3% Stamp Duty Land Tax on their new home in Devon?

A: Stamp Duty Land Tax (SDLT) can be charged at ordinary residential rates plus an additional 3% where an additional dwelling is purchased which is not replacing an old main residence. Full details of the conditions and application of the additional rate are provided at https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09730.

The nomination of the London flat as the main residence for capital gains tax purposes was made under section 222(5) of TCGA 1992. The nomination applies for the purposes of section 222, meaning it only has effect when calculating the amount of capital gains tax relief available if the London flat is disposed of at a gain.

For SDLT, taxpayers do not have the option to nominate a main residence, nor is there a requirement that spouses must only have one main residence between them. If the London flat is determined to be the husband’s main residence for SDLT, then SDLT on the new Devon property will be charged with the additional 3% rate on the entire transaction because the property will not be a replacement of a main residence for both joint purchasers.

There is no statutory definition of ‘main residence’. Which of two residences is the main one must be determined by considering how the individuals reside in them. Case law has determined that a main residence is not the residence in which one spends more time, but that which is more important. HMRC has provided a non-exhaustive list of indicators of a main residence at https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09812 for its employees to use to establish an individual’s main residence.

The checklist may be of little use in determining which property is more important to your client as the indicators are not evenly weighted, but they will give insight into which property HMRC might determine to be the main residence. If the indicators suggest the Devon property is the main residence for SDLT, and your client believes the same, the risk HMRC would dispute the SDLT rates reported is lower than if they differed.

If the balance of indicators suggest the London flat could be your client’s main residence and he believes it is not, it will be useful to prepare a file note summarising the reasons the Devon property is treated as his main residence for SDLT to refer to in the event of an enquiry into the SDLT return.

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