Covid-19 Update: HMRC provide further time for second property purchasers to reclaim the higher rates of SDLT
The reduction in Stamp Duty Land Tax (SDLT) rates (commonly known as the SDLT holiday) has been widely discussed in the media. (See also our briefing). It is worth nothing that HMRC has also previously announced an extension to the three year time limit for re-claim applications for higher rates of SDLT in exceptional circumstances. Our briefing below, published in 2020, outlines the current and ongoing position.
The higher rates of SDLT apply in England and Wales when a second property is purchased under certain conditions. It is possible to re-claim the higher rate of SDLT, which is effectively a 3% surcharge, if the first property (your previous main residence) is sold within three years of the purchase of the second property (the replacement main residence).
This three-year deadline to submit a claim to HMRC has proved difficult for some sellers who are struggling to sell their first property within three years of their second property purchase due to the current Covid-19 crisis.
In light of this, HMRC has just announced that the additional 3% SDLT surcharge, paid on the purchase of a second home, can be reclaimed if the first property fails to sell within three years and the delay is due to Covid-19 or action taken by a public authority. HMRC has confirmed that this further time can apply in “exceptional circumstances” which are outside of the seller’s control, in particular, the impact of the coronavirus in preventing the sale, and an action taken by a public authority preventing the sale (which could of course be related to Covid-19). These exceptional circumstances can be applied in cases where the second property has been purchased on or after 1 January 2017.
It should be noted that HMRC guidance confirms that the seller must then sell their first property “as soon as they reasonably could after ceasing to be so prevented”.
HMRC will consider each application on a case by case basis and based upon the facts of the matter. HMRC has been clear that reasons such as a downturn in the market or a shortage of funds due to Covid-19 will not be considered as exceptional circumstances; only time will tell as cases are presented to HMRC, exactly the ambit of what HMRC will deem as an exceptional circumstance.
This will provide relief for many sellers who are trying to sell their first property within three years of their second property purchase during a time when the coronavirus is disrupting the property market.
If you need advice as to the higher rates of SDLT, technical assessments on SDLT and available reliefs (of which there are potentially many), or in claiming a refund of the 3% surcharge, particularly in respect of the application of the exceptional circumstances provision, please contact Jonathan Shankland or Harriet Page.
This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.