The higher rates of stamp duty land tax (SDLT) are 3% above the standard rates that apply to purchases of residential property. These higher rates apply to an individual who purchases residential property in England at a time when they already own another residential property anywhere in the world and their new property is not replacing their only or main residence.
This means that, if an individual purchases a new residential property to be their home and they either sell their current home before or at the same time as the purchase of the new home, the higher rates of SDLT will not apply to the purchase of the new home.
However, it is not always possible for an individual to sell their home before they purchase a new home and, in these circumstances, they have to pay the higher rates of SDLT at the time of purchasing the second property. If, however, that individual sells their original property within three years from the date of the purchase of the replacement property, they may apply to HMRC for a refund of the additional SDLT that applied because of the higher rates.
On 3 June 2020, HMRC announced that, in some circumstances, an individual may still apply for a refund of the higher rates of SDLT if the purchase of the new home was on or after 1 January 2017 and HMRC is satisfied that the individual:
The old home must be sold before HMRC will consider whether the circumstances are exceptional.
HMRC states that it is a question of fact and degree and each case will be considered on its own merits. HMRC’s SDLT manual states that exceptional circumstances might include:
However, HMRC expressly states that exceptional circumstances would not include a shortage of funds or deciding not to sell the property in anticipation of making a loss.
Legislation implementing this extension to the deadline is due to be included in the Finance Bill 2020.
Individuals who have purchased a new home on or after 1 January 2017 and who have paid the higher rates but did not manage to sell their old home within the three-year period due to Covid-19 restrictions should take advice on whether they may be able to apply for a refund.