|As the property market begins to increase momentum again after lockdown stalled activity, there may be good news for those who have already bought their next house but are still trying to sell their current home. The rule concerning the payment of a 3% surcharge on Stamp Duty Land Tax (SDLT), which usually apply to those buying an additional house, look set to be relaxed in certain circumstances .
The surcharge, which was introduced in April 2016 by HMRC, means that anyone who already owns a property and subsequently purchases a second home or a buy to let property, without disposing of their existing property, is liable to pay a higher rate of SDLT. The surcharge also catches homeowners who complete a purchase of a new home which they intend to occupy as their main residence before selling their existing home. However, homeowners who fall into this category are given a period of 36 months within which to sell their existing property. If the homeowner successfully completes the sale of their existing property within the 36 month period, they can claim back the surcharge element from HMRC.
During the height of the Covid-19 pandemic, people were not permitted to move house except in very limited circumstances. This caused the the property market to come to a standstill and property transactions were paralysed. The government has recognised that this paralysis may have adversely affected some people’s ability to meet the timeframe within which to claim back their refund; their house sale may have stalled through no fault of their own.
In an attempt to redress the position, an amendment to the SDLT rules relating to the 3% surcharge is to be implemented. This will introduce an ‘exceptional circumstances’ provision to the legislation, allowing homeowners whose sale of their existing property has been delayed for reasons outside their control, and who find themselves outside the 36 month period due to the delay, to make an application to HMRC to claim a refund of the surcharge.
The HMRC guidance suggests that homeowners who purchased their new home on or after 1 January 2017, and who have been unable to sell their existing home within the 36 month period, may still be eligible for a refund if they can satisfy the exceptional circumstances test. The exceptional circumstances mentioned in the guidance are that the impact of Covid-19 prevented the sale and/or an action taken by a public authority prevented the sale.
Any claim for a refund which is submitted to HMRC must explain in sufficient detail why you have been unable to sell your existing home within the 36 month period. The reasons you give may include;
Estate agents’ offices being closed during the height of the pandemic
The guidance makes it clear that changes of intentions, poor market conditions or deliberate delays do not qualify as exceptional circumstances. HMRC advise that each case will be assessed individually, on its merits.
Author: Samantha Houlden, Partner, Real Estate, Harrison Clark Rickerbys