My partner and I live together and have three children, but we’re not married. He owns our family home and is also the main earner in the relationship. I have heard that, should we separate, I would not be able to claim financial support from him. Is this right and is there anything I can do to manage this risk?
Alexander Breedon, senior associate in Withers’ London family team, says your question is very timely. We recently received the disappointing news that the government has no plans to reform the laws relating to cohabiting (unmarried) couples, despite widespread calls for change.
The gulf between the potential claims available to cohabiting couples who separate, compared to married/civil partnered couples who separate and divorce, remains wide. But there are avenues available.
In this case there is a family home, albeit owned by your partner, and you also have children together. The best way to think about cohabitants’ potential claims is usually to divide them firstly into claims about properties and then into claims on behalf of children.
My first piece of advice for cohabiting couples is always to make sure that the ownership of your property is properly documented. If you have agreed that the property is a joint property, then make sure it is registered in joint names. Alternatively, consider a declaration or trust which states what proportion of the property belongs to each of you. In addition, you and your partner can enter into a cohabitation agreement, which deals with the financial implications were you to separate, hopefully giving you both peace of mind.
Having valid wills and nominating one another under any pensions or life insurance is also critical to protect your position in case the worst were to happen.
In terms of the property, the starting point is that he owns it and you do not have an interest in it. However, you may be able to claim a share. Very broadly, you would need to show that either you made a direct financial contribution to the property, or you and your partner agreed that you would have an interest in it, or he had promised you an interest in it and you relied on that promise to your detriment.
If you were to bring such a claim — and you should take legal advice as to prospects of success, as these claims are notoriously complicated — the conveyancing file from the purchase, bank statements and your wills may be useful pieces of evidence.
Separately, you may have claims on behalf of your children. In terms of child maintenance, this is ordinarily dealt with by the Child Maintenance Service, who provide an online calculator, showing how much maintenance would be payable. The level depends on your partner’s earnings and the number of nights they spend with him. It applies to all children under 16, or those under 20 in approved education.
In addition to child maintenance, it may be possible to bring claims for a contribution towards housing and/or school fees for the children. These are claims which you bring on their behalf, not claims for yourself and any claim is limited to meeting the children’s needs.
Can we challenge our stamp duty land tax assessment?
I purchased a house with the intention to decorate, tidy up and sell. I have just sold this house. While we have carried out minor renovations — new windows, floors, etc — these have not been particularly expensive. HM Revenue & Customs has challenged our stamp duty land tax (SDLT) assessment claiming we should not have claimed full relief as we are buy-to-let investors and are demanding a greater amount of stamp duty. Can we challenge that?
Natasha Heron, a tax manager at accountants Hillier Hopkins, says stamp duty land tax (SDLT) can be extremely complicated, especially when claiming reliefs that significantly reduce your tax liability. HMRC is taking a much keener interest and is frequently challenging SDLT claims.
The first step is to confirm whether HMRC’s inquiry has been raised within the statutory time limits. HMRC can usually open an inquiry within nine months and 14 days from the effective date (usually completion) and are entitled to inquire whether the correct amount of tax has been paid. That window can be extended if you have since amended your submitted SDLT return.
Assuming the inquiry is valid, the point of contention is whether you are a buy-to-let investor or property trader. The distinction matters as property traders can, in certain circumstances, benefit from a 100 per cent relief from SDLT.
To qualify, a property trader must be a company or Limited Liability Partnership (LLP) which carries out the business of buying and selling property. Relief is not available to sole traders, individuals, or individuals in partnership.
This relief is designed specifically to facilitate the property market to keep things moving and is applicable in very specific scenarios. There are two which could apply to your situation: purchases from personal representatives of a deceased person, or when you step into a chain which has broken down. However, always check HMRC’s fine print as there are conditions attached which must be met by the purchaser and by the previous owner.
This relief is geared towards “flip and sell” traders as any refurbishment works are limited to £10,000 or, if greater, 5 per cent of the consideration, up to a maximum of £20,000.
If all conditions are met, a property trader can receive up to full relief from SDLT, representing significant tax saving.
Our next question
I’m keen to make some non-traditional investments and have been told that fine wine and watches are exempt from capital gains tax on sale. Is this right?
HMRC may believe you are a buy-to-let investor if the property was rented, even if for a short period of time. The relief is not usually available if you rented the property for just one day. There is, however, one exception if you stepped into a chain which has broken down: the relief is still available to you if you rented the property back to the previous owner for a period of less than six months.
Additionally, continuity with direct taxes should also be considered. If the SDLT property trader relief is correctly claimed, the property should be held as trading stock within your financial statements. This means trading profits will be subject to tax at the appropriate rates (income tax for LLPs and corporation tax for companies). By contrast, investment properties will be shown within the investment property section in your financial statements and any uplift in value (gains) may be subject to lower rates of tax.
Given the specific conditions attached to residential property reliefs it is recommended to seek advice from a SDLT specialist and to talk to your tax adviser to ensure your overall tax position for the property is consistent.
The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.
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