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Property SDLT

SDLT Higher Rate

Home selling deadline relaxed

Second homes have been subject to a 3% SDLT surcharge since April 2016, and similar surcharges apply in Wales (3% LTT) and Scotland (4% LBTT). These surcharges are not supposed to apply to the purchase of a main home, but purchasers can be caught out if they buy a replacement main home before completing the sale on their old home.

Where the buyer holds two or more homes at the end of the day of completion the surcharge applies. But this surcharge can be reclaimed if the old home is sold within a specified window, set at three years for property purchases in England, Wales and Northern Ireland, but just 18 months in Scotland.

As the UK property market was effectively frozen due to the coronavirus shut-down many sales fell through and some buyers have been left holding two homes for longer than expected. The UK and Scottish Governments have reacted by extending the window for sale of the old home in slightly different ways.

Scottish home-owners can enjoy a limited extension to the window for sale to three years, where the new home was purchased between 24 September 2018 and 24 March 2020. This is legislated for in the Coronavirus (Scotland) (No.2) Act 2020, Schedule 4 part 5.

Home-owners in England or Northern Ireland have been given an open-ended flexibility for the sales window where the new home was purchased on or after 1 January 2017. If the buyer can show that exceptional circumstances applied to prevent the sale of the old home, such as the covid-19 pandemic, the sales window for the old home is extended.

The taxpayer will be expected to complete the sale of their old home as soon as reasonably possible after the exceptional circumstances have ceased. HMRC will only make a judgement on whether the exceptional circumstances condition applies once the former home is sold and a SDLT refund application has been submitted.

The Welsh Government has made no similar adjustment to the rules for the LTT surcharge.

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SDLT

Reclaim SDLT and LBTT

Since 1 April 2016 a supplement of 3% SDLT has applied to purchases of second and additional homes in England, Wales and Northern Ireland. This supplement was copied in Scotland and became the additional dwelling supplement (ADS) for LBTT, also set at 3% of the entire consideration for properties costing £40,000 or more. A similar 3% supplement applies to LTT in Wales from 1 April 2018.

However, the rules for the SDLT supplement and the ADS for LBTT do not mirror each other, as there are different conditions for relief from the 3% supplement in each country.

Scotland has just amended its law to provide relief from ADS where a couple buy a home together to replace their main home, but their former home was held the sole name of one of the individuals. Taxpayers who fall into this category, and who purchased the replacement home on or after 1 April 2016, can now apply for a refund of the additional LBTT paid.

There are a number of circumstances in which refunds of the SLDT supplement can be reclaimed as set out in the SDLT manual under condition D. Unfortunately, the SDLT manual is not written in plain English and the convoluted conditions and exceptions are difficult to follow. We can help you with questions in this area.

It is worth checking if a refund of the SDLT supplement is due, as it must be claimed within 3 months of the sale of the previous main residence or within 12 months of the filing date of the land transaction return, whichever comes later. Another point to check is whether the property acquired is 100% residential, as the supplement only applies to residential property.

Revenue Scotland: relief from additional LBTT charge

SDLT supplement condition D

Claim refund of SDLT