Can bereavement or mental incapacity extend the 3-year SDLT refund deadline?

Introduction

Many homeowners pay the higher rates of Stamp Duty Land Tax when they buy a new home before selling their old main residence. In most cases, they can reclaim the extra SDLT if they sell the old home within three years. Problems arise when that sale does not happen in time.

A common question is whether HMRC can allow more time where the delay was caused by exceptional circumstances, such as serious illness, mental incapacity or other events outside the taxpayer’s control. This article explains how the rules work, what HMRC is likely to look for, and what kind of evidence may matter if a claim has been refused.

The Question

A homeowner bought a new main residence before selling their previous one and paid the higher rates of SDLT. The previous home was sold after the normal three-year period, and the homeowner asked HMRC to refund the surcharge on the basis that exceptional circumstances had prevented the sale from happening in time.

The circumstances relied on included severe personal distress following bereavement, long-term sleep problems, difficulty managing affairs, and a weak property market. HMRC rejected the claim and stated that its decision was final. The homeowner wanted to know whether there was any realistic basis to challenge that decision and what evidence would be needed.

Nick’s Explanation

Nick’s central point was that the legal test is strict. In anonymised form, his explanation was that HMRC may accept an extension where a person was prevented from selling by circumstances beyond their control, but they are unlikely to allow extra time simply because the case attracts sympathy.

He explained that personal hardship on its own is usually not enough. The argument would need to show something stronger: that the taxpayer was effectively unable to manage the sale because of a condition or event outside their control. In his words, if the taxpayer could show they “lacked the necessary executive function to proceed with the sale”, there might be an arguable case.

Nick also pointed out that evidence would be critical. Medical evidence, professional statements, a clear timeline, and documents showing attempts to sell the property would all be relevant. Even then, he warned that HMRC might still reject the claim, in which case the dispute could be taken to the First-tier Tribunal.

The Law

The higher rates for additional dwellings are set out in Schedule 4ZA to the Finance Act 2003. Where a purchaser buys a new main residence before disposing of their previous main residence, the higher rates may apply at the time of purchase.

If the previous main residence is later sold within the permitted period, the purchaser may be entitled to a refund of the higher rates. The key provision for late sales is paragraph 3 of Schedule 4ZA.

Paragraph 3(7A) to (7C) deals with the situation where the old home is not sold within the normal three-year period. In broad terms:

• paragraph 3(7A)(a) reflects the normal three-year rule;
• paragraph 3(7A)(b) allows for an extended period if HMRC is satisfied that the purchaser was prevented by exceptional circumstances beyond their control from disposing of the sold dwelling;
• paragraph 3(7B) allows the purchaser to apply to HMRC for that determination;
• paragraph 3(7C) allows regulations to govern the timing and content of the application.

The statutory wording is important. The taxpayer must show that they were prevented from disposing of the dwelling by exceptional circumstances beyond their control. That is a demanding test. It is not enough to show that matters were difficult, upsetting, inconvenient or commercially unfavourable.

Where a taxpayer argues that a property was uninhabitable or not suitable for use, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That case indicates that not every serious defect or practical difficulty will make a dwelling unsuitable for use as a dwelling for SDLT purposes. The courts now approach this question more strictly than some earlier taxpayers may have expected.

Analysis

The starting point is to separate three different possible arguments, because they are often confused.

1. The taxpayer sold the old main residence within the normal three-year period and qualifies for the refund in the ordinary way.
2. The taxpayer sold after three years but says exceptional circumstances beyond their control prevented an earlier sale.
3. The taxpayer says the property was uninhabitable or unsuitable for use, so different SDLT treatment should apply.

In this type of case, the second argument is the real issue.

Bereavement by itself is unlikely to satisfy the legislation. HMRC generally treats bereavement as a personal circumstance rather than an external barrier preventing a sale. That does not mean the case must fail, but it does mean the evidence has to go further.

The stronger version of the argument is that the bereavement led to a medically supported condition, such as severe depression, acute grief disorder, serious anxiety, or another state of mental incapacity, and that this actually prevented the taxpayer from dealing with the sale process. If the taxpayer could not give instructions, could not respond to professionals, could not make decisions, or was functionally incapable of progressing the transaction, that is closer to the statutory test.

Even then, the taxpayer would still need to show a causal link. In other words:

• what exactly prevented the disposal;
• during what period that prevention operated;
• why the circumstances were exceptional;
• why those circumstances were beyond the taxpayer’s control; and
• why the property was sold as soon as reasonably practicable once the obstacle lifted.

Adverse market conditions are usually weak on their own. A slow market, reduced demand or the need to lower the asking price will not normally amount to exceptional circumstances. At most, market conditions may support the wider factual picture if there was also a more compelling barrier.

Evidence matters greatly. A persuasive file would usually include:

• medical records or a letter from a GP, consultant, therapist or other suitably qualified professional;
• a detailed chronology of events;
• estate agent records showing when the property was marketed, viewings arranged, reductions made, or instructions delayed;
• solicitor correspondence showing stalled instructions or inability to progress the matter;
• supporting statements from people with direct knowledge of the taxpayer’s condition and functioning; and
• proof of when the sale eventually completed.

If HMRC says its decision is “final and non-appealable”, that should be treated with care. In tax matters, a taxpayer may often have rights to seek a review or appeal to the First-tier Tribunal, depending on the nature of the decision and the statutory route available. The practical question is whether the refusal is one that can be challenged by review, appeal, or judicial process. In a Schedule 4ZA dispute, the First-tier Tribunal may ultimately be asked to consider whether HMRC’s decision was correct under the legislation.

The tribunal will not decide the case on sympathy. It will focus on the statutory test and the evidence. That said, if the evidence genuinely shows incapacity that prevented the sale, a tribunal may be more willing than HMRC to examine the facts closely.

Outcome

A taxpayer in this position may have an arguable case, but only if the evidence shows more than grief or understandable distress. The case becomes stronger if there is credible evidence of mental incapacity or a comparable barrier that actually prevented the disposal of the previous home.

If the case rests only on bereavement and a difficult housing market, HMRC is likely to refuse the claim and the prospects of success are limited. If the case can be framed as one of genuine incapacity, supported by medical or other independent evidence, there may be a basis to challenge the refusal.

Practical Steps

A reader assessing their own position should take these steps:

1. Check the dates carefully: purchase date of the new home, completion date of the sale of the old home, and the exact end of the three-year period.
2. Identify the real obstacle: was it merely delay and difficulty, or was there something that actually prevented the sale?
3. Gather independent evidence, especially medical evidence if incapacity is being alleged.
4. Prepare a clear timeline showing the relevant events and how they affected the sale process.
5. Collect sale-related documents from estate agents and solicitors to show what steps were taken and when.
6. Explain why the property was sold as soon as reasonably practicable once the preventing circumstances ended.
7. Review HMRC’s refusal letter to see whether a review or appeal route is available and note any deadline.
8. If necessary, prepare for a First-tier Tribunal challenge with a focused argument based on the wording of Schedule 4ZA paragraph 3(7A) to (7C).

Anyone considering an “uninhabitable” argument should also assess it cautiously in light of Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, because the threshold is now relatively high.

Conclusion

The SDLT replacement of main residence refund rules do allow extra time in exceptional cases, but the test is narrow. Bereavement alone will rarely be enough. A taxpayer usually needs to show that exceptional circumstances beyond their control actually prevented the sale, with solid evidence to prove it. Where the real issue is mental incapacity, the strength of the case will depend on how well that incapacity can be evidenced and linked to the missed deadline.

Legal References Used

• Finance Act 2003, Schedule 4ZA
• Finance Act 2003, Schedule 4ZA, paragraph 3
• Finance Act 2003, Schedule 4ZA, paragraph 3(7A) to (7C)
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799
• First-tier Tribunal (Tax Chamber)

This page was last updated on 22 March 2026.

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