Generally, a higher rate of SDLT is payable if a purchase results in a buyer owning more than one property on completion of the transaction. This includes the buyer's current home if they still own it at the end of the day they buy their new home. However, it is possible to apply for a refund if the home owner sells or gives away their previous main home within 3 years of buying their new home. They can apply for a refund of the higher SDLT part of the SDLT bill. A refund is not available if the home owner or their spouse still owns any part of their previous home or if the higher rates still apply for another reason. HMRC has now updated its guidance on 'exceptional circumstances' for claiming the SDLT refund outside the normal time limits. The guidance now says:
Exceptional circumstances
You may still be able to apply for a refund, if you purchased your new home on or after 1 January 2017 and were unable to sell your previous home within 3 years. To be able to get the refund, the delay in selling must be because of reasons outside of your control.
These may be, but are not limited to:
- the impact of coronavirus (COVID-19) preventing the sale
- an action taken by a public authority preventing the sale
Once the reason has ended, you must sell the previous home to be able to apply for the refund.
The government has recognised that as a result of as a result of the restrictions placed on the housing market, some people have been unable to sell a previous main residence within the three-year window allowed in order to qualify for a refund of the 3% higher rates of SDLT. The government has stated that:
Affected taxpayers must make a sale as soon as practicable once the exceptional impediment to sale ceases to apply, and this amendment applies to those whose refund window ended on or after 1 January 2020.
HMRC will set out operational guidance on the cases which will qualify for an extended refund window in due course. Taxpayers can write to HMRC setting out their individual circumstances and HMRC will make decisions to grant an extension on a case by case basis. HMRC will also closely monitor the number and type of applications for an extension, as a protection against cases of fraud and abuse.
SDLT is a complex area and home owners should take specialist advice and should raise this with their solicitor at the time of their purchase. In particular, home owners should not assume that their solicitor will deal with any refund issue or application unless the solicitor is specifically instructed to do so. HMRC is not very forgiving and is keen on time limits. Once a client's transaction completes, the solicitor will close the file. They will not assume that the client wants on going advice.
To discuss this or any other property related matter, contact us.