SDLT on a family home upon divorce or separation

The new ‘no fault’ divorce process enables couples to apply for a divorce without having to be separated for two years, or having to demonstrate adultery, unreasonable behaviour or desertion. We’re not solicitors, but it’s worth considering the effect on SDLT where one party keeps the family home.

Typically, either the family home is sold and each party buys a new home for themselves, or alternatively, one party stays in the family home and the other party buys a new home (in some cases with the party who retains the home buying out the leaving party’s share).
In the first case, there’s no particular problem for SDLT.

Provided the family home is sold in the three years before or the three years after the new purchase (in each case) then ‘replacement of main residence relief’ applies and the 3% additional residential rate of SDLT on the new home is avoided. If the previous residence is not sold before the purchase then the 3% must be paid but can be claimed back.

In the second case however, there can be a problem, especially if the purchase of the new home by the leaving party occurs before the divorce is finalised. It’s true that the leaving party will have disposed of their interest in the previous main residence by transferring the whole property to their partner, but if they are still married at the time of the new purchase then the spouse or civil partner could still be deemed a joint purchaser and ownership of the family residence will mean that the 3% applies.

There are three routes that can be followed to avoid this:

1. The rule about spouse/partner being deemed a joint purchaser does not apply if you are separated either by a deed or order of separation or if you are in fact separated in circumstances that are likely to be permanent - but beware, you may be called upon to prove this.
2. If you have agreed the financial and property arrangements in your divorce, then usually you will apply to the court for what is known as a consent order. In other words, the court order formalises your agreement, and the issue of a consent order means you are not liable for the 3%
3. Worst case, pay the 3% and you have 12 months in which you can apply to amend the SDLT return on the new purchase.