UK and International Tax news

SDLT Higher Rates On Additional Dwellings And Refunds

Friday 19th June 2020

Following a recent Ministerial Statement, HMRC has issued further guidance on the incidence of the Stamp Duty Land Tax higher rates for additional dwellings and the current deferral period for selling an existing home.

Where a person buys a dwelling, a higher rate of Stamp Duty Land Tax [HRAD] is payable where the property is not the only dwelling that the person owns. However, HRAD will be refunded where the new property replaces the person’s main home which is sold within three years of buying the new home.

Whilst three years is and remains enough time to sell a previous main dwelling, the government now recognises that there will sometimes be exceptional circumstances not in the control of the buyer or seller which mean that the previous dwelling cannot be sold within three years. In particular, the Ministry of Housing, Communities and Local Government has issued guidance in response to the COVID-19 pandemic, and advised against the marketing of properties in most cases from 26 March to 13 May 2020. This meant that some people could not sell their properties during this time. In addition, some sellers have found that prospective buyers have had to pull out of transactions directly as a result of COVID-19. Other individuals have been unable to undertake house sales because they need to self-isolate.

The Government has now indicated that it does not want people to face an additional tax charge as a result of exceptional circumstances outside of their control, such as the government’s recent instructions relating to the housing market. As a result, the government intends to change the HRAD legislation. This will mean that people can receive a refund where they sell their previous main residence outside the three year period because exceptional circumstances made it impossible to sell the property within three years. The COVID-19 pandemic is an exceptional circumstance, and other examples might include action taken by a public authority preventing the sale of the property.

HMRC’s guidance indicates that the person must sell their previous main residence as soon as possible after the exceptional circumstances no longer apply in order to qualify for the refund. The legislation will apply where the three year period ended on or after 1 January 2020 and the previous main residence is sold after the three years.

If you would like more information on this announcement, please contact Keith Rushen on 0207 486 2378.

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