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More time to reclaim the Stamp Duty Land Tax surcharge
4th June 2020
The government has announced a relaxation of the three-year time limit for selling one’s previous main residence in order to reclaim the additional 3% SDLT charge.
When an individual buys a dwelling, the rate of SDLT will depend on how many other dwellings are owned by the purchaser at the end of the day on which the purchase completes. In most instances, if the purchaser has other interest in dwellings, the SDLT will be 3% higher than the standard rate.
This is a problem if one is having to bridge when replacing one’s main residence and in that instance, the additional 3% is payable, but a refund can be claimed if the previous dwelling is sold within three years of the completion of the purchase, and if the refund claim is made within 12 months of the sale.
To date, HMRC have been absolutely rigid in the enforcement of that three-year limit.
Claims of exceptional circumstances
However, where the new main residence was bought on or after 1 January 2017, so the three-year deadline is due to expire in 2020 or afterwards, HMRC will consider claims of exceptional circumstances.
The two examples of exceptional circumstances given are the prevention of the completion of the sale by reason of:
- government guidance during the Covid-19 pandemic; or
- other action taken by a public authority to prevent the sale.
The implication is that this is a permanent change, although brought in primarily to mitigate hardship caused by Covid-19.
The guidance makes it clear that changes of intentions, general poor market conditions or deliberate delays will not be exceptional.
While this is a welcome relaxation, giving relief to those in advance stages of sales and an imminent deadline when the restrictions applied, it would be unwise to rely on the relaxation, and every effort should be made to plan sales with appropriate allowance for mishaps in the sale process.
It remains to be seen how these rules will apply in the event of a post-lockdown property slump, were that to happen, but it would seem unlikely that HMRC would view an inability to obtain a desired price as exceptional, given the stated examples.
For further information, contact Robert Bailey or Scott Woolley
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