The Chancellor’s summer statement announces a stamp duty holiday…how does this impact on those going through a divorce, asks FLiP director James Pirrie?
The Chancellor’s announcement on stamp duty today points, in theory, to a saving of £15,000 for those purchasing a property at the £499,999 number. This is enough to furnish and equip a home at a decent level and still leave change for the (socially distanced) moving in party or an amazing holiday.
Even for those with property sales above the £500k threshold, there is likely to be help because of the way that these things work:
- Ms A gets a good deal on the purchase of the £750k property from Mr & Mrs B, because:
- Mr & Mrs B are separating and each purchasing at £500k (with appropriate mortgages) and they are anxious to complete (and Mr. C & Ms D are more than willing to exploit the boost to their market by this initiative, selling their properties at inflated prices).
So, in all probability, the stamp duty holiday is simply energising and increasing sale prices for the sub £500k barrier (as well as pulling those prices just above £500k down to that level).
Indeed those of us old enough are taken quickly back to the years of double-MIRAS relief. The story went that the tax benefit for co-purchasers was left in place for six months after the March 1988 budget through a simple typo that did not seem worth correcting. The result in the reactive property market was catastrophic, as it propelled a generation of co-purchasers, perhaps rashly into the market on a “now or never” basis, only to see the market collapse immediately afterwards leaving plenty of co-purchasers ruing the day that they did what they were led to be believe was the sensible thing.
What might be the family law tips:
For separating couples
- Mr and Mrs B certainly should press on with their replacement purchases … There are precious few breaks for separating couples and those that come along need to be grabbed with both hands.
- They are likely to have to sell their home to be able to do so if they are to sidestep the 3% penalty stamp duty through double ownership.
- They may struggle to be able to proceed without a deal … and this is where the court in lockdown presents them with certain problems. They may not be able to get a solution to their case quickly enough. Non-court dispute resolution will be crucial … if possible they will use direct negotiations (with or without lawyers) or mediation to reach agreement. If not they should definitely consider arbitration – as the process that can impose a solution but in a far-faster time-frame.
For those couples who have already done their deal
- There is plenty of analysis as regards whether Covid represented a change of circumstances that undermined the deals that were already done. The answer was “it may do – check the detail.” The same may go for deals negotiated on the assumption of need and where stamp duty costs were provided for that now will not fall due for payment. This may justify a return to tweak the numbers.
For couples deciding to cohabit
There may be a sense of “now or never” to get quickly into the market at the bottom end. We always urge caution. The withdrawal of stamp duty (for some) bonanza may seem a deal too good to miss, but just think carefully:
- when it ends, the market will draw breath;
- the commitments of co-ownership are significant – don’t take the step without being certain;
- and always, always always go forward only with the benefit of a cohabitation agreement covering off all of how the bills will be met and what happens if the relationship does not survive the traumas of the very, very strange times in which we live.
Director James Pirrie specialises in complex financial issues and non-adversarial and cost-effective approaches to divorce and separation including mediation, arbitration and collaborative law. James helps clients take control of the issues that affect them, clarifying priorities, exploring all the options and identifying the best way forward. Contact James at E: firstname.lastname@example.org or T: 020 7420 5000