SDLTM09807 - SDLT - Higher rates for additional dwellings: Condition D - exceptional circumstances

Previous main residence sold after the new main residence is purchased – Exceptional Circumstances

In the vast majority of cases, the existing 3-year time limit found at paragraph 3(7)(b) Schedule 4ZA FA2003 provides enough time for people facing a wide variety of personal circumstances to dispose of a previous main residence. It caters for unexpected events or delays which may occur from time to time when marketing or selling a property. Such events might include a delay elsewhere in a chain of transactions, illness, a delay in the renovation of a property before being sold or a general downturn in the economy.  

However, where a purchaser acquires a new main residence on or after 1 January 2017, they may still be eligible for a refund if exceptional circumstances prevented them from selling their previous main residence before the expiry of the 3-year time limit.  

An extension of the time limit in paragraph 3(7)(b) may be permitted where HMRC is satisfied that the person:  

• was prevented from disposing of their previous main residence within the 3-year time limit due to exceptional circumstances that could not reasonably have been foreseen, and 
• sold the previous main residence as soon as they reasonably could after ceasing to be so prevented

The previous main residence must be sold before HMRC will consider whether the circumstances are exceptional. There is no pre-transaction clearance facility.

It is a question of fact and degree and each case will be considered on its own merits. Generally speaking, occurrences of exceptional circumstances will be very rare and well outside of the norm. It is also likely that exceptional circumstances will affect large groups of people during the same time period, and not be a one-off occurrence only affecting one or both of the parties to a transaction. Exceptional circumstances might include:  

• being prevented from selling the property owing to government imposed restrictions; or  
• other action taken by a public authority preventing the sale of the property.  

A mere change of intention of any party to the transaction at a late stage (for example a buyer withdrawing), a shortage of funds, deciding not to sell the property in anticipation of making a loss (for example during a downturn in the market), or collapse of a chain will not be regarded as exceptional circumstances, rather they are the sorts of events that can be expected to occur in the ordinary course of buying and selling property.

In addition to there being exceptional circumstances to take into consideration, HMRC needs to be satisfied that those circumstances did genuinely prevent the person from selling their previous main residence within the 3-year period. Even when there may be some exceptional circumstances to consider, HMRC is unlikely to allow an extension to the 3-year period where a person did not leave a reasonable amount of time to sell their property within the usual 3-year period, or where the exceptional circumstances ended well before the end of the 3-year period.

Where a purchaser believes exceptional circumstances apply, they should ask for a refund once they have sold their previous main residence – see SDLTM09809.

The purchaser will need to make clear:

• what the exceptional circumstances were,
• how and why these exceptional circumstances prevented them from disposing of their previous main residence,
• why the circumstances were not foreseeable and
• evidence that as soon as they reasonably could, after the exceptional circumstances ended, they sold their previous main dwelling.

A purchaser should only contact HMRC once their previous main residence has been sold as HMRC must consider all the relevant facts which can only be established once the previous main residence is sold. HMRC may request further information to determine whether or not an extension to the 3-year period should be allowed.

It is at HMRC’s discretion to accept whether exceptional circumstances apply to a purchaser which prevented them from disposing of their previous main residence and they were not reasonably foreseeable. Where HMRC disagrees, no extension to the normal time limit is given and there is no right of appeal for the purchaser against that decision.  

Previous versions of this guidance contained examples referring to the Covid-19 pandemic. This was because between 26 March and 13 May 2020 there were government-imposed restrictions on the selling of property due to the pandemic. These examples have been removed as there will be almost no circumstances in which Covid-19 could still be said to have prevented the sale of the previous main residence within the three-year period

Example 1   

Mrs C purchased her new main residence on 31 July 2017. On 1 September 2023, which is more than three years after the purchase of their new main residence, she sold her previous main residence and wrote to HMRC to ask for a refund. She states that she was waiting for the property market to pick up so she could achieve a better price for her previous main residence than if she’d sold it within the 3-year period.  

As Mrs C did not dispose of her previous main residence as soon as she reasonably could after being so prevented, this would not be regarded as an exceptional circumstance. She would not be due a refund of the higher rates that she paid when she purchased her new main residence.  

Example 2

Mr and Mrs F purchased a flat in a major city in early 2017. They have now had children and wish to upsize. They start to arrange the sale of their property but discover that it has external cladding and cannot obtain an EWS1 certificate until remediation work is completed on the building facade. Mr and Mrs F still wish to purchase a new home; they purchase a new main residence in January 2020 and pay the higher rates. Mr and Mrs F do not try to sell their old main residence as they are aware of the issues in trying to sell a property with cladding and that mortgage lenders would require both the remediation works to be completed and an EWS1 certificate obtained before lending against the flat. They decide they will try to sell once the remediation work is completed and they have an EWS1 certificate.

Due to backlogs and demand, the remediation works were only completed in April 2024 and it took a further 5 months to obtain an EWS1 certificate. Mr and Mrs F then immediately market the flat for sale and manage to sell it in October 2024. They write to HMRC and request a refund of the higher rates. They say the delay in selling their previous main residence was due to the exceptional circumstances of having to have remediation work done on the cladding and obtaining an EWS1 certificate. They also say they could not have reasonably foreseen that this was going to be an issue when they first purchased the previous main residence in 2017.

Mr and Mrs F are eligible for a refund of the higher rates. The delayed sale of Mr and Mrs F’s old main residence within the usual 3-year period is due to exceptional circumstances which could not reasonably have been foreseen and these circumstances prevented them from conventionally selling their property due to delays in arranging remediation works and obtaining an EWS1 survey.

Example 3

Ms G was living with her parents and became aware of the issues with flats that had external cladding. As a cash buyer, she managed to buy a flat, knowing that it had external cladding requiring remedial works, at a much lower price to reflect the work needed to be carried out. Her purchase of the flat completed in May 2021 and this became her main residence. Ms G later decided that she didn’t want to live in a flat and purchased a house in January 2022 and paid the higher rates.

When Ms G tried to sell her flat, she found that she couldn’t find a buyer until the remediation works were done and had passed an EWS1 survey. The remediation works were not completed until September 2025. Ms G sold the property in January 2026. Once sold, she writes to HMRC claiming exceptional circumstances stopped her from disposing of her previous main residence in the usual three-year time frame.

Ms G was fully aware of the cladding issues and the need for remediation work to be carried out when she purchased the flat – it was part of the reason she purchased it in the first place. Whilst the property has issues which had to be addressed before being sold conventionally, Ms G’s reason for not selling the property within the time 3-year time limit could have reasonably been foreseen at the time she acquired the flat in May 2021. Therefore, a refund of the higher rates is not possible.