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HMRC internal manual

Stamp Duty Land Tax Manual

From
HM Revenue & Customs
Updated
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Reliefs: Certain acquisitions of residential property

General overview and definitions FA03/S58A and FA03/SCH6A

Relief from Stamp Duty Land Tax is available in some circumstances to purchasers of residential property.

Relief can be available

  • to house building companies or property traders who purchase a dwelling from an individual as part of a transaction where the individual buys a new dwelling from the house building company. See SDLTM21020 and SDLTM21030
  • where a property trader acquires a dwelling from the personal representatives of a deceased person. See SDLTM21040
  • where a property trader acquires a dwelling where a series of transactions breaks down. See SDLTM21050
  • where an employer or a property trader purchases a dwelling from an employee who is re-locating. See SDLTM21060 and SDLTM21070

Each page that follows lists the conditions which need to be met for the reliefs to be allowed.

If all the conditions are fulfilled the purchase of the individual’s former dwelling is exempt from charge to Stamp Duty Land Tax.

The purchaser should complete a land transaction return to claim the relief available and the consideration paid should be shown at box 10 of form SDLT1.

Partial relief is available where the grounds and garden of the former dwelling are larger than the permitted area but all the other conditions for the relief available have been fulfilled.
In these circumstances, a land transaction return should be completed claiming the partial relief available.

Definitions used in this guidance are as follows

  • house-building company means a company that carries on the business of constructing or adapting buildings or parts of buildings for use as dwellings

The rules governing the relief for a house building company also apply to a company connected with it.

ICTA88/S839 applies for the purpose of determining whether a company is connected with a house-building company

a property trader means a

  • company
  • limited liability partnership
  • partnership whose members are all companies or limited liability partnerships

that carries out the business of buying and selling properties

The relief is not available to sole traders, individuals or individuals in partnership.

  • a principal in relation to property trader means a director in the case of a company, or a member in the case of a limited liability partnership
  • a dwelling also includes its garden or grounds
  • new dwelling means a building or part of a building which has been

    • constructed for use as a single dwelling and has not previously been occupied
    • adapted for use as a single dwelling and has not been occupied since its adaptation
  • permitted area in relation to a dwelling also includes its garden or grounds no more than

    • an area (inclusive of the site of the dwelling) of 0.5 of a hectare
    • a larger area necessary for the reasonable enjoyment of the dwelling considering its size and character

    Where a larger sized area is appropriate, for example where a house with substantial grounds is transferred to the house-building company, a larger area may be permitted if it is required for the reasonable enjoyment of the dwelling

    This does not mean that, for example, stables and a paddock would be necessary for the reasonable enjoyment of the dwelling.

    The requirement in the legislation is that it is the area that is most suitable for occupation and enjoyment with the dwelling

  • acquisition of the new dwelling means the acquisition, by way of grant or transfer, of a major interest in the dwelling
  • acquisition of the old dwelling means the acquisition, by way of transfer, of a major interest in the dwelling
  • market value of a dwelling and of the permitted area means respectively the market value of the major interest in the dwelling and of that interest so far as it relates to the area in question
  • the refurbishment of a dwelling means carrying out works that enhance or are intended to enhance its value but does not include cleaning or work to ensure it meets minimum safety standards

the permitted amount in relation to the refurbishment of a dwelling is £10,000 or 5% of the consideration for the acquisition, whichever is the greater, up to a maximum of £20,000

An individual

  • has to be identified as the vendor of the former dwelling and also as the purchaser of the new dwelling
  • can act with other individuals but cannot act with companies, apart from, for example the house-building company

This would account for cases where the sale and purchase was made with someone else, for example a spouse or partner. These parties do not have to be the same people for both the sale and the purchase

There is no definition of only or main residence so it is a question of fact whether a property is, or was, the individual’s only or main residence.

The factors and criteria set out in CG64551-2 may be useful. Note in particular that there is no requirement that the new only or main residence should be in the UK.

It follows that if an individual acquires property both in the UK and abroad at most one of them can be the individual’s only or main residence.

There is no provision, as there is for Capital Gains Tax, for an individual to nominate one property as an only or main residence.