Changes to SDLT - Main Residence Relief for properties sold prior to replacement.
The legislation ensuring that the surcharged rate of SDLT is not chargeable where a purchaser makes a qualifying replacement of a main residence, is changing from 26 November 2018.
The Finance Act 2003 makes provision for the standard rate of SDLT to apply to the purchase of a second residential property where the purchase is a replacement for a previously sold man residence.
The rules are changing because when the SDLT rate was announced on 26 November 2015, the Chancellor allowed a 3 year window of grace to individuals, who had already sold their main residence before the announcement and would otherwise have not been able to benefit from replacement of main residence relief on new purchases. 3 years on from that date, this transitional relief is coming to an end on 26 November 2018.
The new rules which will be in place for completions on or after 26th November 2018 are, if individuals seek to rely on the sale of a former main residence which occurred before the purchase of the new main residence to ensure the standard rate of SDLT is payable, the property disposed of must have been:
- Occupied as a main residence within the 3 years preceding completion of the new main residence (at any time);
- and sold of within the 3 years preceding completion.
The rules requiring that no property has been purchased with the intention of it being a main residence between the sale of the old main residence and the new purchase are already, and will remain, in force.
The new provisions will impact natural purchasers who:
- Hold interests in residential land worth over £40,000 and not subject to leases of 21 years or more.
- Occupied and/or sold a main residence more than 3 years before completion of a replacement main residence; have not purchased a main residence since that sale; and intend on completing the purchase of a main residence on or after 26 November 2018.
The existing rules and requirements will not alter if the former main residence is disposed of after purchase of a new main residence, as a result of this change in the rules.
If you do have any questions, please contact our property team on 01606 74301