SDLTM09805 | SDLT - higher rates for additional dwellings: Condition D - paying the higher rates of SDLT

As set out in SDLTM09800 there are two situations in which a purchase of a dwelling will be a replacement of a main residence.

The first situation

Where the disposal of the old main residence occurred before, or on the day of the purchase of the new main residence [Para 3(6)] and the replacement of main residence conditions are otherwise met, Condition D will not be met. The purchase will not comprise a “higher rates transaction” and there is no need to account for higher rates of tax.

Example

An individual buys a dwelling and intends to live in it as her main residence. The effective date of the transaction is 31 May 2019. If she had previously sold a dwelling at any time on or since 1 June 2016, then the purchase may be a replacement of a main residence. The dwelling she disposed of would have to have been her only or main residence at some time during the period 1 June 2016 to 31 May 2019. She must not have acquired another new main residence after the disposal and before the purchase.

If the individual had purchased her new dwelling on or before 26 November 2018 then the three year time limits would not apply. The dwelling previously disposed of by her must have been her only or main residence at some time. She still must not have acquired another new main residence after the disposal and before the purchase.

The second situation

Where the old property is still owned when the new property is purchased, the higher rates of SDLT will be due and payable. However, the SDLT return can subsequently be amended, and the additional rate paid can be refunded, if the conditions referred to set out in SDLTM09800 are subsequently met.

An exception to this occurs where the subsequent disposal occurred

• after the purchase of the new property, but

• before the deadline for submission of the land transaction return for that purchase.

In such a case, the land transaction return can be completed as if the transaction was not a “higher rates transaction” and the higher rates do not apply.

Time limit for amending the SDLT1 return

Where the sale of the previous main residence takes place on or after 28 October 2018, an amendment showing that the transaction is no longer a “higher rates transaction” must be made using Form SDLT16: -

• within 12 months of the sale of the previous main residence, or

• within 12 months of the filing date of the SDLT return relating to the new residence, whichever comes later.

Where the sale of the previous main residence took place on or before 28 October 2018, the return must be amended and tax reclaimed: -

• within 3 months of the sale of the previous main residence, or

within 12 months of the filing date of the SDLT return relating to the new residence, whichever comes later.

Example

An individual purchases a new main residence on 1 November 2021 and still owns his previous main residence at the end of the day of purchase whilst seeking a sale. He meets Condition C. He has not previously sold a main residence, so meets Condition D when he purchases his new main residence. The transaction is charged at the higher rates. If he sells his previous main residence at any time during the period to 1 November 2024, then the purchase will cease to be a higher rates transaction and the purchaser can amend his SDLT return and reclaim the additional rate paid.

An individual’s disposal of a main residence for condition D can only count against one purchase. However, if more than one individual owns a home jointly, each can rely on their own disposal to meet Condition D.

If a disposal causes a previous purchase to cease to be a higher rates transaction, that disposal cannot be taken into account when deciding if a later purchase counts as a replacement of a main residence [Para 8(2)].

Example

An individual sells an old property 3 months after buying a new property so that Condition D is no longer met [the second situation referred to in SDLTM9800] and a refund of the higher rates paid becomes available. The sale of the old property cannot be used again to count against the purchase of a different new property.

Where an individual is treated for the purposes of SDLT as owning a major interest in property, then when those interests are disposed of the individual is also treated as disposing of the interests for the purpose of determining if condition D is met. See SDLTM09815 for examples of situations where an individual may be treated as owning property.