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Replacement of Main Residence Exception – Stamp Duty 3% Surcharge

Author

Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Replacement of Main Residence Exception – Stamp Duty 3% Surcharge – Introduction

This article considers the ‘three-year rule’ on the replacement of an only or main residence that acts as an exception to the 3% stamp duty land tax surcharge on additional properties.

Where old home is sold before the new one is purchased

General

Where a taxpayer sells their former main residence after buying their new home then it is possible to claim an SDLT refund of the 3% surcharge. This may still be the case where the buyer owns other properties in addition.

In such a scenario at the end of the day of the transaction (the purchase of the new house) the buyer will own two or more dwellings. As such, the 3% surcharge is triggered on the purchase.

Can this 3% additional tax liability be claimed if the former main residence is subsequently sold?

The answer is yes. But there are conditions that must be satisfied.

The Conditions

Each of the following conditions must be satisfied:

  • the buyer intends to live in the new home as the buyer’s only or main residence;
  • Within the subsequent three years, the buyer (or their spouse or civil partner) sells or otherwise disposes of the old home;
  • At any time within the three years before the purchase of the new home, the buyer lived in the old property as their only or main residence.

Where old home is sold before, or at the same time, as the new home is purchased

General

Here, the buyer has sold their old home before, or at the same time, they purchased the new main residence. However, the taxpayer also owned interests in other properties.

In the absence of any relief, the purchase of the new home would be subject to the 3% surcharge.

However, there is a relief but, again, there are conditions which must be satisfied.

The Conditions

Each of the following conditions must be satisfied:

  • the buyer intends to live in the new home as the buyer’s only or main residence.
  • the disposal of the old home (the “sold dwelling”) had to have completed within the three years before the purchase of the new home
  • Immediately after that disposal the buyer (nor the buyer’s spouse or civil partner) retained a major interest in the sold dwelling
  • the taxpayer must have lived in the old home as their only or main residence at some point within the three years leading up to the purchase of the new home
  • At no time on or after the disposal of the sold dwelling has the buyer (or the buyer’s spouse or civil partner) acquired a major interest in any dwelling with the intention of living in it as the buyer’s only or main residence.

The relief may only be claimed by individuals

The relief is only available to individuals – as such, a company could not claim the relief.

 

If you have any queries about the replacement of main residence exception, or would like some assistance in claiming an SDLT refund, then please let us know.

 

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