As movers struggle to sell their old home during the lockdown, the government has extended the time allowed to reclaim stamp duty.
Those who have moved to a property they considered their main residence before selling their previous main residence had to pay the higher rate of Stamp Duty Land Tax (SDLT) but if they sold their previous home within three years they were able to reclaim the difference between the higher rate and what they would have paid.
The three-year SDLT reclaim rule
Owners of investment or holiday homes must pay an additional 3% stamp duty on the purchase of properties that are not their main residence, however down-sizers and other homeowners who were able to move to a new main residence before selling their old one where caught in the tax trap. The three-year reclaim rule was meant to right this wrong.
During the pandemic, selling a property has become increasingly difficult with would be buyers not able to enter a property to view it or to get a survey done. The government has therefore extended the three-year SDLT reclaim period.
HM Revenue and Customs (HMRC) has amended its guidance this week adding examples of exceptional circumstances where you may be able to apply for a refund of stamp duty after the three-year period has ended.
It states: “You may still be able to apply for a refund if you purchased your new home on or after 1st of January 2017 and were unable to sell your previous home within three years. To be able to get the refund, the delay in selling must be because of reasons outside of your control. These may be, but are not limited to, the impact of coronavirus (COVID-19) preventing the sale.”
Once the reason for preventing the sale has ended, you must sell your previous home to be able to apply for the refund. You can then write to HMRC with an explanation of why you were unable to sell your previous main residence within three years.
By amending the rules, the government has shown a degree of flexibility which will give homeowners some breathing space to sell their home and get the higher rate of stamp duty refunded.
The change applies to anyone who hit the three-year mark from January this year onwards.