Generally, a 3% additional surcharge of SDLT applies on the purchase of dwellings:
We are going to focus on the replacement of the main residence on this page. In a usual situation, you will sell your old residence first and buy a new residence after that (or both transactions completed together). In this case, you don't have to pay a 3% additional rate of Stamp duty and land tax (SDLT).
However, if you buy your new residence first and sell your old after residence after that, you will have to pay an additional 3% SDLT surcharge while buying your new residence. You then can claim a refund from HMRC for this 3% additional SDLT when you sell your old residence.
What are the conditions for claiming a 3% SDLT Surcharge Refund?
As per para 3 of Schedule 15 of Finance Act 2003, there are two parts to the replacement of a purchasers' main residence:
The effective date of the transaction usually is the date of completion. Let's look into the parts of each of these conditions in detail below.
What count as the main residence for the 3% SDLT refund claim?
The SDLT legislation does not define the "main or only residence". So, we will need to look at the ordinary meaning together with meaning from the capital gains legislation and case laws.
In a simple case where an individual resides at only one dwelling, that will be their only or main residence. The complication arises when an individual resides at more than one dwelling. In such a case, all of the facts and particulars of the particular case must be considered in order to conclude which residence is the main residence. Unlike for CGT, it is not possible for an individual to elect the main residence in case of more than one residence, and any election made for CGT will be irrelevant for SDLT.
As per HMRC guidance SDLTM09812, the following list of points to consider, although not exhaustive, may be useful in establishing which residence is an individual’s main residence:
HMRC further clarifies that merely occupying a property will not in itself make it a main residence. There needs to be permanence and expectation of continuation to the occupation to establish it as the main residence.
New Dwelling: Intention or Occupation?
The condition in respect of the new dwelling is a question of intention instead of actual occupation. Does the purchaser intend the dwelling to be his only or main residence? The intention has to be there at the effective date of the transaction. As per legislation, the only intention is relevant not the actual occupation. So, in theory, you may never live in a new residence and still be eligible for a 3% SDLT refund claim as long you had the intention to occupy as only or main residence. Clear evidence of your genuine intention may be required to satisfy HMRC on cases where there is actual occupation or delayed occupation.
The intention does not have to occupy immediately. The following does not prevent the claim:
Sold Dwelling - Conditions for the refund claim
The sold dwelling should meet the following conditions:
Sale of Previous Residence after more than three years - is there any exception?
The default rule is that you must dispose of your old residence within 3 years of the purchase of the new residence to claim a refund of the SDLT surcharge. However, in exceptional circumstances, HMRC may permit the extension of the time limit at its discretion if HMRC is satisfied that the person:
Exceptional circumstances might include being prevented from selling the property due to Government Covid restrictions or other action taken by a public authority preventing the sale of the property. HMRC may also consider situations like a serious illness.
HMRC has made it clear that the following does not qualify as exceptional circumstances:
HMRC will not consider the application on the ground of exceptional circumstances before the actual sale of the previous main residence. There is no advance clearance facility for this.
What is the deadline for claiming the refund?
The claim for refund must be made within (whichever is later):
Does UK Property Accountants process a 3% SDLT refund claim?
Yes, we are the authorised HMRC agent for SDLT and process the 3% SDLT claim on a regular basis for our clients. Our SDLT tax experts will review your information and compile the application together with all the required documents and evidence to enable HMRC to process the refund in a timely manner.
What information is required for claiming a 3% SDLT refund from HMRC?
The following information is required for filing an SDLT refund claim with HMRC:
How long will it take for the refund to be paid?
HMRC aims to process all repayment requests within 15 working days assuming that you provide HMRC with all the information we need together with the application. If HMRC requires further information, there would be further delay in the payment.
Frequently asked questions (FAQs) and Examples on 3% SDLT refund claim
The FAQs and examples below are taken from HMRC guidance with slight changes in the details.