Can you reclaim the higher rates of SDLT if you transfer your old home to a company within 3 years?

Introduction

Many homeowners paid the higher rates of Stamp Duty Land Tax (SDLT) when buying a new home before disposing of their previous main residence. A common follow-up question is whether that extra SDLT can be reclaimed later if the former home is sold or otherwise transferred within the permitted time limit.

This issue often arises where the old property is not sold on the open market but is transferred in another way, such as to a company. The key question is whether that transfer counts as a disposal of the former main residence for the purposes of the SDLT refund rules.

The Question

A married couple bought a new home in June 2022 while still owning their previous home. Because they had not yet disposed of the earlier property, they paid the higher rates of SDLT on the new purchase.

They lived in the earlier property as their main residence before moving to the new one. They are now considering transferring the former home to a limited company within three years of buying the new home, and they want to know whether that transfer could allow them to reclaim the higher rates surcharge paid on the new purchase. They are also concerned about possible Capital Gains Tax consequences and whether incorporation relief under section 162 of the Taxation of Chargeable Gains Act 1992 might help.

Nick’s Explanation

Nick’s core point was that a refund of the higher rates can be available where a buyer purchases a new main residence before disposing of the old one, but only if the former main residence is disposed of within the statutory time limit.

In anonymised form, his explanation was:

“If you purchased your current main residence while still owning your previous main home, you would have been charged the additional SDLT surcharge. However, you may be eligible for a refund, but only if specific conditions are met. The key condition is that your former main residence must be disposed of within three years of the purchase of your new main residence.”

He also noted that disposal will usually mean a sale, but that another transfer of ownership may also qualify if the property ceases to be held in the individual’s own name.

That is the right starting point. The refund rules are focused on whether there has been a qualifying disposal of the former only or main residence within the required period. A transfer to a company can in principle amount to a disposal, because the individuals cease to own the property personally and the company becomes the new owner.

The Law

The higher rates of SDLT for additional dwellings are contained in Schedule 4ZA to the Finance Act 2003.

Broadly, where an individual buys a dwelling and, at the end of the effective date of the transaction, still owns another dwelling, the higher rates may apply.

There is, however, an important replacement of only or main residence exception. Where a buyer purchases a new main residence before disposing of the old one, the higher rates may still be charged at the time of purchase, but a refund can later be claimed if the old main residence is disposed of within the permitted period.

The legislation and HMRC guidance generally require the following points to be satisfied:

• the new property must be intended to replace the buyer’s only or main residence;
• the old property must previously have been the buyer’s only or main residence;
• the buyer must dispose of the old residence within three years of acquiring the new one; and
• the refund claim must be made within the applicable filing deadline set by HMRC.

For SDLT purposes, a disposal is not limited to a simple arm’s length sale to an unrelated third party. A transfer of legal and beneficial ownership can be enough, depending on the facts and the structure of the transaction.

If the property is transferred to a connected company, the SDLT position on that transfer is separate from the refund issue. The company acquisition may itself trigger SDLT, usually by reference to market value rules where the parties are connected.

The Capital Gains Tax position is also separate. A transfer to a company is generally treated as a disposal for CGT purposes, often at market value if the company is connected. Whether any gain is relieved by private residence relief, letting relief, no gain/no loss rules between spouses, or section 162 incorporation relief depends on the full facts and should not be assumed.

Analysis

The SDLT refund question can be analysed in stages.

First, the purchase of the new home appears to have attracted the higher rates because the buyers still owned their previous dwelling on the day they completed the new purchase. That is a common and correct reason for the surcharge to arise initially.

Second, the earlier property appears to have been their former main residence. That matters because the refund rules are not available merely because another property is later sold. The property disposed of must be the former only or main residence.

Third, timing is critical. If the former main residence is disposed of within three years of the purchase of the new home, the statutory time condition for a refund may be satisfied. On the facts described, the proposed transfer is intended to take place within that three-year window, so the timing point may be met.

Fourth, the nature of the disposal must be considered carefully. A transfer from individuals to a limited company is capable of being a disposal. In practical terms, if the couple cease to own the former home personally and the company becomes the owner, that is generally the kind of event that can satisfy the “disposed of” requirement for the SDLT refund rules.

Fifth, the fact that the old and new homes were jointly owned does not prevent a refund claim, but the ownership percentages and the way the transfer is carried out should be checked carefully. HMRC will expect the refund claim to match the legal and beneficial ownership position.

Sixth, the SDLT refund on the new home should not be confused with the tax cost of transferring the old home to the company. The transfer itself may create:

• an SDLT charge for the company acquiring the property;
• a possible CGT disposal by the individuals, usually measured by market value if the company is connected; and
• possible anti-avoidance or relief issues depending on whether there is a genuine property business and whether section 162 TCGA 1992 can apply.

On the CGT point, the statement that there would be no gain simply because the transfer is at market value is too broad. If the property has increased in value since acquisition, a market value disposal can create a chargeable gain. The real question is whether any available relief reduces or eliminates that gain. If the property was the couple’s only or main residence throughout the relevant ownership period, private residence relief may be substantial or complete. If there were periods of non-occupation, rental use, or mixed use, the answer may differ.

Section 162 incorporation relief is even more fact-sensitive. It generally requires a business to be transferred as a going concern to a company, together with the whole of the business assets other than cash, in exchange wholly or partly for shares. A passive investment holding arrangement does not automatically qualify as a business for this purpose. Whether a property letting activity is enough depends heavily on the level of activity and the authorities in this area.

Outcome

In principle, yes: if a couple bought a new main residence, paid the higher rates because they still owned the old main residence, and then transferred that former main residence to a company within three years, that transfer may count as a disposal for SDLT refund purposes.

If the other statutory conditions are met, a refund of the higher rates element on the new home may be available.

However, that does not mean the overall transaction is tax-free or automatically worthwhile. The transfer to the company may trigger its own SDLT charge and may also create a CGT disposal at market value. The refund question and the wider restructuring tax consequences must be analysed separately.

Practical Steps

If you are assessing a similar case, the practical steps are:

• confirm the completion date of the new home purchase;
• confirm that the old property was genuinely your only or main residence before the move;
• check whether the disposal of the old property will complete within three years of buying the new home;
• review whether the transfer structure clearly removes the property from personal ownership and transfers it to the company;
• calculate the SDLT refund potentially due on the new home;
• separately calculate the SDLT that may be payable by the company on acquiring the old property;
• take specific CGT advice on private residence relief, spouse ownership, market value treatment, and whether section 162 TCGA 1992 is realistically available; and
• submit any SDLT refund claim within HMRC’s deadline, using the official process.

If part of your argument involves saying that a property was uninhabitable or not suitable for use as a dwelling, be aware that the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Conclusion

A transfer of a former main residence to a company can, in the right case, count as a disposal that allows a refund of the higher rates of SDLT paid on a replacement home purchase. The key conditions are that the old property really was the former main residence and that the disposal happens within three years of acquiring the new one. But the transfer may also create separate SDLT and CGT consequences, so the full tax position should be checked before proceeding.

Legal References Used

• Finance Act 2003, Schedule 4ZA
• Taxation of Chargeable Gains Act 1992, section 162
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799
• HMRC guidance on refunds of the higher rates of SDLT

This page was last updated on 22 March 2026.

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