Housebuilder / trader reliefs
29 November 2023
As part of the Stamp Duty Land Tax (SDLT) reform in 2004, various new reliefs were introduced. Two key reliefs were enacted in July 2004, namely the part exchange relief and the chain break relief, which were designed to reduce SDLT liabilities for traders and/or house building companies engaged in residential property transactions. The relief allows the entire acquisition to be exempt from SDLT charge.
Part Exchange Relief
This relief is available to both house building companies and property traders (albeit with slightly different eligibility criteria).
To qualify for relief as a house building company, it mustpurchase a dwelling from an individual who is also acquiring a new dwelling from the same company.
- The individual must have used the old dwelling as their main or only residence at some point in the two years before the acquisition date.
- The individual must acquire a new dwelling from the house-building company and intend to use it as their main or only residence.
- Both acquisitions must be interconnected and must be made in consideration of each other.
- The land area acquired by the house-building company cannot exceed a permitted area (generally 0.5 hectares but may be greater if the grounds are suitable for the enjoyment of the dwelling). If the land acquired exceeds the permitted area, partial relief is still available, subjecting part of the consideration for the acquisition to SDLT. This is calculated as the difference between the market value of the permitted area and the total market value of the old dwelling, including all land.
To qualify for relief as a property trader,it mustpurchase an old dwelling from an individual who is also acquiring a new dwelling from a house-building company.
- The property trader’s purchase must be part of a business that includes acquiring dwellings from individuals who are buying from house-building companies.
- The individual must have used the old dwelling as their main or only residence in the two years leading up to the acquisition.
- The individual must acquire a new dwelling and intend to use it as their main or only residence.
- The land area acquired by the property trader cannot exceed a permitted area. Partial relief is also available if the land exceeds the permitted area (as above).
Chain Break Relief
This relief is for property traders in cases where a chain of residential property transactions breaks down. To be eligible for relief certain conditions must apply.
- The property trader purchases an old dwelling from an individual who had initially arranged to sell the old dwelling and acquire another dwelling, but those arrangements have failed.
- The acquisition of the old dwelling should facilitate the individual’s acquisition of the other dwelling.
- The property trader conducts the acquisition as part of a business involving dwellings from individuals in similar circumstances.
- The individual must have used the old dwelling as their main or only residence in the two years before the property trader’s purchase and intend to use the other dwelling as their primary or only residence.
- The land area acquired by the property trader must not exceed the permitted area. Partial relief is also available if the land exceeds the permitted area (as above).
Although none of these reliefs are the most popular reliefs that we encounter, they are all very valuable if the requirements can be satisfied. However, as some of the requirements relate to the past and future actions of the seller, a trader looking to take advantage of the relief would be well advised to require a seller to provide written assurances that those aspects are satisfied (usually by giving warranties to this effect).
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at November 2023.