This relief is provided by the relevant provisions of schedule 4 to the LBTT(S)A 2013.
Description of relief
Where a property trader buys a home from a person, the purchase by the property trader is relieved from LBTT if certain conditions are met.
The eight qualifying conditions are as follows:
- The person has made arrangements to sell the old home and buy another one;
- The arrangements to sell the old home fall through;
- The acquisition by the property trader of the old home is made to allow the acquisition of the other home by the person to proceed;
- The acquisition of the home must be made in the course of a business that includes or consists of acquiring dwellings from individuals in the situation described in the first three conditions above;
- The person must have lived in the home as their main or only residence at some time during the two years before the property trader bought it;
- The person intends to use the other home as their main or only residence;
- The property trader does not intend:
- to spend (meaning any financial outlays in this context) more than the permitted amount on refurbishment of the home. Refurbishment means the carrying out of works to enhance the value of the home but does not include cleaning the home or works in order to meet minimum safety standards. The permitted amount depends on the consideration of the home as follows:
Consideration for the acquisition of the home Permitted amount Not more than £200,000 £10,000 More than £200,000 but less than £400,000 5% of the consideration More than £400,000 £20,000
- to grant a lease or licence of the home, except for the grant of a lease or licence for no more than six months; or
- to permit any principal or employee, or anyone connected to them, to occupy the home; and
- the area of land acquired by the property trader must not exceed the permitted area which is 0.5 hectares (including the site of the home) or if larger, it must be a piece of ground in keeping with the size and character of the home. In the latter case, the permitted area is to be taken as the part of the land that would be most suitable for occupation and enjoyment of the home as its garden or grounds if the rest of the land were separately occupied.
If the conditions 1-7 listed above are met, but the condition relating to the permitted area of the garden or grounds is not, partial relief may be claimed. The chargeable consideration for the acquisition of the person’s home by the property trader is calculated by deducting the market value of the permitted area from the market value of the home.
Withdrawal of the relief
Relief is withdrawn if the property trader:
- spends more than the permitted amount on refurbishment of the home;
- grants a lease or licence of the home, except for the grant of a lease or licence for no more than six months; or
- permits any principal or employee, or anyone connected to them, to occupy the home.
Where one of these events occurs, the property trader must make a further LBTT return to us.
The return must identify how much tax is chargeable. Where relief is withdrawn, the amount of tax chargeable is the amount that would have been chargeable for the transaction but for the relief.
The LBTT return must be made before the end of 30 days beginning with the day after the day that the event occurred.
Claiming the relief
To claim this relief see the guidance on 'How to make an online LBTT return' which is available separately on our website. Please note, this relief falls under the ‘Relief for certain acquisitions of residential property’ option on the ‘Type of Relief’ drop down list on the return.