HMRC SDLT: Stamp Duty Land Tax Relief for Property Traders in Employment Relocation Cases

SDLTM21070 – Reliefs: Certain Acquisitions of Residential Property

This section outlines the conditions under which a property trader can acquire a dwelling without incurring Stamp Duty Land Tax, specifically when the purchase is related to an individual’s job relocation. The relief is contingent on several criteria, including the nature of the acquisition, the individual’s previous residence, and the property’s market value.

• The acquisition is part of a business involving buying dwellings from individuals relocating for work.
• The individual lived in the dwelling as their main residence within two years of purchase.
• The purchase is due to the individual’s job relocation.
• The purchase price does not exceed the market value.
• The land acquired does not exceed the permitted area.
• Partial relief is possible if the land exceeds the permitted area, with some consideration chargeable.
• Relief is withdrawn if the property trader exceeds refurbishment limits, grants a lease, or allows occupation by connected persons.
• Relief remains if a short-term lease is granted to the individual for up to six months.

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Title: SDLTM21070 – Reliefs: Certain acquisitions of residential property

Acquisition by Property Trader in Case of Relocation of Employment

If a property trader buys a house from an individual—either by themselves or with others—they may not have to pay Stamp Duty Land Tax (SDLT) if certain criteria are met. Here are the specific conditions that must be satisfied:

• The property trader is purchasing the dwelling as part of a business that involves buying homes from individuals who are moving because of a job relocation.
• The seller lived in their previous home as their main or only residence at some point within the two years leading up to the sale date.
• The purchase occurs because the seller needs to move due to a job change.
• The purchase price does not exceed the residence’s market value.
• The amount of land being acquired is within the allowed limits.

If it turns out that the land being acquired goes beyond these allowed limits but all other conditions are satisfied, the property trader might still be able to claim partial relief from Stamp Duty Land Tax. In this case, part of the total price paid for the property would be subject to the tax.

Understanding Partial Relief

When partial relief is claimed, the amount that will be taxed is based on the difference between two values:

• The market value of the allowed area, which includes the previous home and its permitted land.
• The total market value of the entire property, including all the land.

You can find definitions of these criteria in detail at SDLTM21010.

What Does Relocation of Employment Mean?

A relocation of employment refers to when an individual changes their work location for any of the following reasons:

• They become an employee at a different company.
• They change their role or responsibilities within the same job.
• They move to a new physical work location but remain with the same employer.

Understanding Change of Residence

A change of residence is connected to a relocation of employment if the move is mainly for the purpose of living closer to the new workplace. For example, if someone needs to move because their previous home is too far from their new job, this qualifies as a change of residence.

The ‘new place of work’ refers to where the person usually performs their job duties after the relocation occurs.

Conditions for Relief Withdrawal

Relief from paying Stamp Duty Land Tax may be taken away if the property trader does any of the following:

• Spends more than the allowed amount on improvements or renovations to the home.
• Gives a lease or licence for the house.
• Allows any of their directors, employees, or anyone connected to these individuals to live in the property.

However, there are exceptions to this rule. If the property trader plans to give a short lease or licence to the seller for up to six months after acquiring the property, this will not affect the relief. The relief remains intact even in this situation.

Further Clarification on Expenses and Limits

It’s important to understand the limits set around expenses and the nature of renovations that might affect the tax relief status. Property traders should carefully assess how much they plan to spend on refurbishments after acquiring the home. Exceeding the set limit can jeopardise their eligibility for the relief.

For example, if a property trader purchases a home for £200,000 and then spends £50,000 on renovations that are not considered necessary, they may lose relief because the amount spent exceeds allowable refurbishments.

Permitted Area Definition

The permitted area refers to the size of land a property trader can acquire while still being eligible for tax relief. This is usually a specific threshold defined by the regulations, and exceeding it can lead to partial or complete loss of relief. Traders should ensure that they read and understand these guidelines before finalising any acquisitions.

Practical Example

Let’s consider a practical example to illustrate how these rules work in real life:

Imagine Sarah works in London but has to move to Manchester because her company has relocated. She sells her home in London and buys a smaller house from a property trader who is part of a business dealing with relocations. If the property trader buys Sarah’s house, which she lived in for most of the last two years, all conditions are met:

• The property trader’s business is focused on helping people move due to job changes.
• The selling price of Sarah’s home matches its current market value.
• The area of land that the property trader is acquiring falls within the acceptable range.

In this scenario, the property trader wouldn’t pay Stamp Duty Land Tax on the purchase. However, if they then decide to spend excessive money on renovations, or allow someone connected to them to live there, they would risk losing this tax relief.

Important Points to Consider

• Make sure to document all details related to the acquisition, including evidence of the job relocation and the seller’s past residence.
• Familiarise yourself with market values for properties to ensure compliance with the pricing rules.
• Plan any refurbishments wisely to remain within the set limits.

By understanding these guidelines and adhering to the rules, both property traders and individuals can navigate the complexities of Stamp Duty Land Tax when working with property relocations. For further clarification on any specific issues, you may want to consult with a tax professional or refer to the relevant HMRC documentation.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: Stamp Duty Land Tax Relief for Property Traders in Employment Relocation Cases

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