Several years ago, a colleague relayed a rumour that HMRC was considering ending its helpline specifically for SDLT, as it was "not a complicated tax".
At the time, such a suggestion was eyebrow raising enough, but in subsequent years, following changes to the regime, it is certainly now impossible to justify.
A particular complication has been the imposition of the three per cent surcharge on the purchase of additional residential property. Whether or not the surcharge is chargeable depends on variables such as the nature of the interest acquired, whether it is being acquired by a company, the value, the status of the buyer’s property ownership at completion and others.
It is not clear cut. Moreover, if, having applied the criteria and conditions and resolved that the additional charge applies, there are also circumstances in which it can be reclaimed.
The relevant statutory provision dealing with this element is the snappily titled Sch 4ZA(2) paragraph 3 of the Finance Act 2003.
The surcharge applies where the buyer was an individual, the property purchased as a major interest (which is defined as a legal or beneficial interest in fee simple absolute/a term over seven years absolute) in a single dwelling and the conditions A-D set out in paragraphs 3(2-5) are met.
For the purposes of reclaiming the paid surcharge, the focus is on condition D that states that the surcharge is payable where the dwelling that has been purchased is not a replacement for the buyer’s only or main residence.
The act defines what constitutes a replacement in paragraph 3(6) insofar as there may have been previous residential property transactions by the individual in the three years leading up to that purchase and which would mean that the surcharge is not payable.
However, if conditions A-D are met on the effective day of the purchase then the surcharge is payable and has to be paid.
With that in mind, paragraph 3(7) goes on to provide a further set of conditions, which may be fulfilled so that future transactions enable the original purchase to be deemed a replacement dwelling. This means condition D would not apply and the surcharge can be reclaimed.
The conditions are that:
- on the effective date of the original purchase, the buyer intended the dwelling acquired to be their only/main residence;
- in a subsequent transaction within three years from the day after the effective date of the original purchase the buyer (or their spouse of civil partner) disposes of a major interest in another dwelling (‘the sold dwelling’) so that neither they (nor their spouse or civil partner if they are living together) have a major interest in it; and
- at any time during the three years leading up to date of the purchase, the sold dwelling was the buyer’s only or main residence.
By way of example:
If Mr Smith buys a new main residence on 30 April 2018 but by the end of that day still owns his previous main residence then he will have to pay the surcharge, as he meets condition D. However, if, on that day, he was seeking a sale of his original residence and then sells it at any time up to 30 April 2021 then the original 2018 purchase is no longer treated as a transaction to which the surcharge applies.
To reclaim the surcharge, the request for repayment either must be made via the gateway on line or using HMRC’s form (available here).
The request must be made within the later of three months of the sale of the original residence, or 12 months of the filing date of the return from the original purchase. Do not forget to make the claim!