HMRC SDLT: Understanding SDLT Higher Rates for Additional Dwellings and Condition D Requirements

SDLT Higher Rates for Additional Dwellings: Condition D

This section explains the conditions under which higher rates of Stamp Duty Land Tax (SDLT) apply when purchasing additional dwellings. It outlines two main scenarios: replacing a main residence and owning an old property when purchasing a new one. Amendments and refunds are possible if certain conditions are met.

• If the old main residence is sold before or on the day of purchasing a new one, higher rates do not apply.
• If the old property is still owned when buying a new one, higher rates apply but can be refunded if conditions are later met.
• Amendments to SDLT returns can be made within specific time limits to reclaim higher rates.
• A disposal of a main residence can only count against one purchase for Condition D.
• If a disposal causes a previous purchase to cease being a higher rates transaction, it cannot be used for a later purchase.

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Guidance on SDLT – Higher Rates for Additional Dwellings: Condition D

This guidance covers situations where buying a new home may not attract the higher rates of Stamp Duty Land Tax (SDLT). Specifically, it focuses on how selling an old main residence affects the tax owed on a new purchase. Here are the key points to keep in mind:

When is a Purchase Considered a Replacement of a Main Residence?

According to SDLTM09800, there are two scenarios regarding the purchase of a new home and the sale of an old one. Here’s a breakdown of each situation:

The First Situation

This situation applies when you sell your previous main residence either before or on the same day you buy your new one. If this condition is met, then you will not face higher rates of tax. Here’s how it works:

• The sale of the old home must happen before or on the day the new home is purchased.
• You cannot have bought another new main residence after selling the old one but before the new purchase.

Example:
An individual purchases a new home on 31 May 2019, intending to use it as her main residence. If she sold her previous dwelling any time between 1 June 2016 and 31 May 2019, that sale counts as replacing her main home. She cannot have purchased any other home between selling her old one and buying the new one.

Note:
If she purchased her new home on or before 26 November 2018, then the three-year time limit does not apply.

The Second Situation

This situation occurs when the old home is still owned at the time of buying the new home. In this case, you will need to pay the higher rates of SDLT initially. However, there is a way to claim back the extra amount later if the conditions for a replacement home are met.

• If you sell your old home after purchasing the new one, but before the estimated submission date for SDLT for the new property, you can amend your SDLT submission.
• This amendment can change your transaction from a ‘higher rates transaction’ to a standard one, meaning the higher rate does not apply.

Time Limits for Amending SDLT Returns

If you need to amend your SDLT return to reflect that your purchase is no longer a “higher rates transaction,” here are the time limits based on when you sold your old home:

For Sales on or After 28 October 2018

• You must amend your SDLT return using Form SDLT16 within 12 months of selling your previous main residence, or within 12 months of the SDLT filing date for the new home, whichever is later.

For Sales on or Before 28 October 2018

• You need to amend the return and claim back the extra tax within 3 months of selling the old home, or within 12 months of the SDLT filing date for the new home, whichever is later.

Example:
Suppose someone purchases a new main residence on 30 April 2018 and still owns their old home at the time of the new property purchase. Since they meet Condition C, they will be liable for the higher rates of SDLT initially. If they sell the old home before 30 April 2021, they can then amend the SDLT return to reflect that the purchase is no longer subject to the higher rates.

Individual Circumstances Affecting Condition D

When it comes to Condition D, it is important to note that an individual can only use the sale of a previous main home to count towards one new purchase.

• If multiple individuals jointly own a home, each can use their own sale to meet the requirements of Condition D.
• However, if a property sale allows for a previous purchase to meet the Condition D requirements, that same sale cannot be used again for a different new property purchase.

Example:
If someone sells their old property three months after buying a new one, the sale no longer qualifies under Condition D. Although they can reclaim the higher rates paid, they cannot then use that sale when purchasing another new property.

Special Considerations Based on Property Ownership

When determining if someone meets Condition D for SDLT, it’s necessary to consider all properties they are treated as owning. When these properties are sold, it counts as a disposal for evaluating Condition D.

For further details on scenarios where an individual might be treated as owning specific properties, refer to SDLTM09815.

Important Notes

• Always keep accurate records of all transactions regarding buying and selling properties, as this will help in determining your SDLT obligations.
• If you are unsure about your situation, it’s advisable to seek professional advice to ensure you’re handling your SDLT correctly.

This information is designed to clarify SDLT rules surrounding the purchase of additional homes and the implications relating to replacing a main residence. For specific situations, consult the relevant SDLT guidance or a tax professional for personalised advice.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: Understanding SDLT Higher Rates for Additional Dwellings and Condition D Requirements

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