Read the original guidance here:
HMRC SDLT: SDLTM21050 – Reliefs: Certain acquisitions of residential property

Reliefs for Certain Property Acquisitions

Introduction to Reliefs

When a property trader buys a home from a private seller, there are specific circumstances under which they can claim relief from paying Stamp Duty Land Tax (SDLT). This guidance explores these situations in detail.

Conditions for Relief

There are several criteria that must be satisfied to qualify for this relief, particularly when the purchase involves a breakdown in the chain of transactions. The key requirements are:

• Intent to Buy and Sell: The individual selling the property (referred to as ‘the old dwelling’) must have intended to sell this property and buy another property.
• Transaction Breakdown: The arrangements to sell the old dwelling must fail. If the individual’s plans to finalize the sale fall through, the exemption could apply.
• Purpose of the Acquisition: The property trader buys the old dwelling to help the individual go ahead with their new purchase.

Additional Requirements

Aside from the primary conditions above, specific additional criteria must be met for the relief to apply:

• Business Context: The property trader must be operating a business that involves purchasing homes from individuals in these situations.
• Main Residence Requirement: At some point in the two years before the sale, the individual must have used their old dwelling as their only home. They should also plan to make their new property their main home.
• Land Size Restriction: The area of land the property trader acquires with the old dwelling should not be larger than the permitted area.

What Happens If the Land Exceeds the Permitted Area?

If the property being sold consists of more land than allowed, the trader can still apply for partial relief, assuming the other conditions are satisfied. Here’s how that works:

• The chargeable amount is determined by the market value of the additional parts of the old dwelling that exceed the permitted area.
• This includes calculating the difference between the market value of just the permitted area (the old dwelling and its grounds) and the total market value of the entire property.

When Relief Is Withdrawn

The relief will not apply if the property trader engages in any of the following actions:

• If they spend more on fixing up the old dwelling than what is allowed.
• If they rent out or lease the old dwelling.
• If they allow their employees, principals, or individuals associated with them to live in the old dwelling.

Exceptions to Withdrawal of Relief

If the property trader does provide a lease or licence to the original owner that lasts for six months or less, this will not risk the relief being withdrawn. The key conditions are:

• The lease must be given after the property trader acquires the old dwelling.
• The duration of the lease or licence must not exceed six months.

How to Claim Relief

To claim this relief in your SDLT return, you need to do the following:

– Enter relief code 28 in the designated relief question on the return form.

Make sure to include any other required information that supports your claim.

Example Scenario

Let’s look at a practical example to clarify these points.

– An individual, John, intends to sell his family home (the old dwelling) so he can buy a new house with more space.
– Unfortunately, the buyer for John’s home suddenly backs out of the deal, leaving him unable to complete the chain.
– A property trader, Sarah, purchases John’s home to help him move forward with his new property purchase.
– Since John lived in his old home for the two years before selling and plans to live in the new home as his main residence, all of Sarah’s requirements are met.
– Sarah’s business focuses on helping individuals like John in similar situations.

In this scenario, Sarah’s purchase of John’s home would be exempt from SDLT, provided she does not exceed the allowed renovation costs and does not rent or lease the property.

Additional Resources

For further definitions and criteria related to these conditions, please refer to SDLTM21010. This resource provides additional information that may assist in clarifying the various terms and requirements mentioned in this guidance.