Probate SDLT Relief Where Deceased Had Moved Out or Let the Property
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Can a property trader keep probate SDLT relief by renting the property out for short periods?
Introduction
Property traders sometimes buy a dwelling from personal representatives and claim the special SDLT relief available under Schedule 7 to the Finance Act 2003. A common problem then arises if the property does not sell quickly. The trader may want to let it for a period and try again later when the market improves.
The key question is whether that temporary letting causes the relief to be withdrawn. This matters because, if relief is withdrawn, the SDLT that would originally have been payable becomes due.
Where the argument is that a property was uninhabitable or not suitable for use as a dwelling, the legal threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That is a separate issue from property trader relief, but it is relevant because some buyers look for alternative SDLT routes when a transaction no longer fits the trader relief conditions.
The Question
A property trader acquired a dwelling from an estate and relied on the probate-related property trader relief from SDLT. The original plan was to refurbish and resell the property. Because the resale market weakened, the trader considered renting the property out for around 18 months to 2 years before selling.
The trader wanted to know whether the relief could be preserved by:
- granting assured shorthold tenancies of no more than 6 months;
- allowing the tenancy to continue on a rolling basis after an initial 6-month term; or
- granting repeated short agreements to the same occupier.
Nick’s Explanation
Nick’s core point was that the legislation is strict. In anonymised form, his explanation was:
“The exemption can be removed if a tenancy agreement for more than 6 months is established. If you want to retain the stamp duty exemption, it is very important to keep the tenancy agreements under 6 months. Having an initial 6-month contract with a clause that allows for an ongoing rolling contract will also likely invalidate the exemption.”
He then added an important practical qualification:
“If you keep the AST under 6 months and you genuinely replace the tenants on each occasion, then you will fall within the terms of the legislation. This process can carry on almost indefinitely, but if queried by HMRC you need to demonstrate that your primary intention is to sell the property, but you have been unable to do so due to adverse market conditions.”
When asked whether the same tenants could stay under repeated short agreements, his answer was effectively no. He pointed back to the statutory wording and said that, if he were trading, he would look instead at genuinely short-term occupation models such as short-stay or short-term corporate arrangements.
His overall warning was clear: HMRC can withdraw the relief if the statutory conditions are breached, and the full SDLT that would otherwise have been payable can then become due.
The Law
The relevant rules are in Finance Act 2003, Schedule 7, which provides relief for certain acquisitions by property traders. In the probate context, the relevant relief is the acquisition by a property trader from personal representatives.
The withdrawal provision quoted in the correspondence states:
“Withdrawal of relief under this Schedule
11(1) Relief under this Schedule is withdrawn in the following circumstances.
(3) Relief under paragraph 3 (acquisition by property trader from personal representatives) is withdrawn if the property trader—
(a) spends more than the permitted amount on refurbishment of the dwelling, or
(b) grants a lease or licence of the dwelling, or
(c) permits any of its principals or employees (or any person connected with any of its principals or employees) to occupy the dwelling.
(6) Where relief is withdrawn the amount of tax chargeable is the amount that would have been chargeable in respect of the acquisition but for the relief.”
For some other categories of property trader relief in the same Schedule, the legislation contains a limited exception where a lease or licence is granted to “the individual” for no more than six months. That wording appears in paragraph 11(2), 11(4) and 11(5).
That distinction matters. The probate route under paragraph 3 does not contain the same express six-month carve-out in the wording quoted above. So the statutory position for acquisitions from personal representatives is more restrictive than readers sometimes assume.
Analysis
The analysis starts with the exact relief claimed. If the acquisition was relieved under Schedule 7 paragraph 3, being an acquisition by a property trader from personal representatives, paragraph 11(3) says relief is withdrawn if the trader grants a lease or licence of the dwelling.
That means the first question is not simply whether the tenancy is longer than 6 months. The more basic question is whether the grant of a tenancy or licence is allowed at all under the particular relief claimed.
Step by step:
If the property trader claimed relief on the probate acquisition route, the withdrawal rule in paragraph 11(3) applies.
Paragraph 11(3)(b) says relief is withdrawn if the property trader grants a lease or licence of the dwelling.
Unlike some other parts of paragraph 11, the probate provision quoted does not include an express exception for a lease or licence of no more than six months.
On that wording, granting an AST would create a real risk that the relief is withdrawn, even if the term is 6 months or less.
A rolling tenancy after an initial fixed term is even more problematic, because it suggests continuing occupation under an arrangement that goes beyond a short one-off stopgap.
Repeated renewals to the same occupier would also be difficult to reconcile with the idea that the dwelling is being held for resale in the course of a property trading business.
That is why the statutory wording has to be read carefully. The six-month language appears elsewhere in the Schedule, but not in the probate withdrawal rule quoted here. A trader should therefore be cautious about assuming that “under 6 months” automatically preserves relief in every case.
Nick’s comments reflect a practical reading of how short-term occupation may sometimes be approached in trading cases, especially where there is evidence that the property remains genuinely held for sale and market conditions have delayed disposal. However, the legislation itself remains the starting point, and for probate acquisitions the wording is notably strict.
If HMRC opens an enquiry, it is likely to look at substance as well as form, including:
- whether the business genuinely intended to resell the property from the outset;
- whether the property was actively marketed for sale;
- whether any occupation arrangement was truly short-term and commercially incidental;
- whether the same occupier remained in place through repeated agreements;
- whether the arrangement functioned in reality as an ordinary residential letting.
If the arrangement looks like a standard buy-to-let period inserted before sale, HMRC may argue that the relief conditions were not maintained and that SDLT becomes payable.
Outcome
The practical conclusion is that a property trader who claimed probate SDLT relief should be very cautious about renting the dwelling out.
On the wording quoted from Schedule 7 paragraph 11(3), granting a lease or licence of the dwelling can withdraw the relief. A rolling AST, or repeated short ASTs to the same tenant, creates a particularly strong risk.
Even where a trader considers using genuinely short occupation arrangements, the position should be checked against the exact relief claimed and the exact documentation used. It is not safe to assume that a 6-month AST preserves relief in a probate acquisition case.
Practical Steps
If you are assessing this issue, the sensible next steps are:
Confirm exactly which SDLT relief was claimed on the purchase. The result depends on the specific paragraph relied on.
Read the withdrawal provisions for that relief line by line. Do not assume that an exception in one paragraph applies to another.
Review whether any tenancy, licence or occupation arrangement has already been granted, and if so on what terms.
Check whether the property has remained genuinely held for resale, with evidence such as marketing history, agent correspondence, price reductions and records showing adverse market conditions.
Avoid relying on repeated short ASTs to the same occupier as a way of sidestepping the withdrawal rules.
If the property may no longer fit the relief conditions, quantify the SDLT exposure early rather than waiting for an HMRC enquiry.
If another SDLT argument is being considered, such as claiming the property was not suitable for use as a dwelling, remember that the threshold is now relatively high after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
Conclusion
For a property trader who claimed SDLT relief on a probate acquisition, letting the property can easily put the relief at risk. The legislation for acquisitions from personal representatives is strict, and ordinary residential tenancies are dangerous territory. If the dwelling is to be occupied before sale, the exact statutory route and the real commercial facts need careful review.
Legal References Used
- Finance Act 2003, Schedule 7
- Finance Act 2003, Schedule 7, paragraph 3
- Finance Act 2003, Schedule 7, paragraph 11
- Finance Act 2003, Schedule 7, paragraph 11(3)
- Finance Act 2003, Schedule 7, paragraph 11(6)
- Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799
This page was last updated on 22 March 2026.
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