SDLT Update: extension to time limit for replacement of main residence refunds in “exceptional circumstances

HMRC to Allow Applications for Post-Transaction Refunds Based on the Replacement of Main Residence Exemption Outside of the Usual 3 Year Time Limit.

Under the rules governing the higher rates of SDLT payable for purchases of additional residential dwellings, the purchase of a new dwelling intended for use as the purchaser’s main residence before the purchaser’s previous main residence has been disposed of will in most circumstances, attract the higher rates of SDLT.  A refund of the higher rates element of the SDLT bill can be claimed where the previous main residence is disposed of after the new purchase, but, under the relevant legislation, the refund is only available where the disposal of the previous main residence takes place within the period of 3 years following the dated of purchase of the new main residence.

HMRC has, however, recently updated its guidance on the higher rates to indicate that it will consider applications for refunds in situations where “exceptional circumstances” beyond the taxpayer’s control have prevented the disposal from being able to be completed within the prescribed 3 year period.

HMRC provides the following examples of possible exceptional circumstances:

- being prevented from selling the property owing to government guidance during the Covid-19 pandemic; or

- other action taken by a public authority preventing the sale of the property.

On the other hand, HMRC makes clear that more commonly occurring potential delaying factors, such as hold-ups elsewhere in a chain of transactions, illness, delays in pre-sale renovation works, a general downturn in the housing market or a last-minute change of mind by either party to the transaction will not qualify as exceptional circumstances.

The previous main residence must be disposed of as soon as reasonably possible once the exceptional circumstances no longer prevent sale, and the refund application can only be made once the disposal has been made.  HMRC indicates that each case will be considered on its own merits and it will be a question of fact and degree whether any particular circumstances are accepted as exceptional.