SDLT Refunds: what if Covid-19 has delayed a property sale?

Since April 2016, there are two tiers of SDLT rates applicable to residential property purchases, dependent on whether the purchaser (or a related person) already owns a ‘major interest in a dwelling’.  If no major interest in a dwelling is already owned, the normal rates will apply. If however the purchaser owns a major interest in another dwelling and the new purchase does not replace his/her main residence, an additional 3% is added to each SDLT band as follows:

When the additional rate rules were introduced, a concession was given to taxpayers who do not initially replace their main residence but then subsequently sell their former main residence within a specified time frame.  Provided the former main residence is sold within 3 years of purchasing the new property, the taxpayer will be eligible for a refund of the additional rate of SDLT paid on the new property (the amount over and above the standard rate) from HMRC.

Recognising that the advent of lockdown will have had an adverse impact on those trying to sell a former main residence and reclaim some SDLT, the government, on 3 June 2020, announced a limited extension to the 3 year window for those periods ending on or after 1 January 2020.

HMRC’s published guidance indicates that taxpayers will still be eligible to apply for a refund if they were prevented from selling a previous main residence within the window owing to exceptional circumstances beyond the taxpayer’s control.  It highlights exceptional circumstances as those including:

• 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.

The guidance sets out a number of helpful examples to demonstrate when exceptional circumstances might be argued by the taxpayer.  These examples make clear that a mere change of intention of any party to a transaction at a late stage or choosing not to sell in anticipation of making a loss (due to a downturn in the market) will not be sufficient to meet the exceptional circumstances test.  There must be something above and beyond the kind of events which occur in the ordinary course of buying and selling property in order for the extension to apply.

So whilst not particularly far-reaching in application, the extension will be of relief to a number of individuals who have struggled to sell during the last 6 months.  It is important to note that HMRC will not rule on whether exceptional circumstances apply before a previous main residence has been sold and so professional advice should be sought if there is any doubt as to whether a claim can be made.