Chain Break Relief: claiming a Stamp Duty refund
When a property trader buys a dwelling to fix a broken property chain, they may not pay Stamp Duty on the purchase. 1 in 3 overpay HMRC in Stamp Duty. If you overpaid in Stamp Duty in the last 4 years, you could get a refund.
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What is Stamp Duty Chain Break Relief?
Property chains occur when people buy a new property and sell their current property at the same time. The chain ends when a first-time buyer or someone who isn’t buying and selling simultaneously purchases a property.
A chain fails when one seller in the process loses their buyer. When a property trader purchases a home that lost their buyer, they don’t pay Stamp Duty. This is known as Chain Break Relief.
Developers benefit from this relief by paying less Stamp Duty. The public benefits by finding a quick fix to breaks in a chain, allowing a faster, smoother move.
How it works
01
An individual attempts to sell their home and buy a new one. In doing so, they enter a property chain.
02
The seller loses their buyer and the chain fails.
03
A property trader buys the property to enable the chain to proceed.
04
The property trader meets the required conditions post-sale to remain eligible.
What is the eligibility criteria for Chain Break Relief?
The property trader must purchase properties where the chain fails as a course of business
The seller must have occupied the home as their main or only residence at some point in the last 2 years
The house and its land bought by the property trader must not be larger than 0.5 hectares*
*If the size of the land exceeds the permitted limit, partial relief may be given to reduce the costs of Stamp Duty for the property trader.
How is Stamp Duty calculated for Chain Break Relief?
When all the eligibility criteria are met, the property trader pays no Stamp Duty on the purchase of the home. However, there are exceptions.
When the first two conditions are met but the third (the size of the land) is not, partial relief can be claimed.
The amount of chargeable consideration is the difference between the market value of the permitted area and the total market value of the old dwelling.
If the property developer does not meet the required post-sale conditions, the relief is withdrawn and they have to pay Stamp Duty, unless other relief applies.
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What are the post-sale conditions?
To remain eligible for relief, the property trader must meet certain post-sale conditions.
- They must not:
- Spend more than £10,000, or 5% of the purchase price, whichever is greater, up to a value of £20,000, on non-essential refurbishments
- Grant a lease or license of the dwelling
- Allow any employees or someone connected to them to live in the home
- They can however:
- Intend to grant a lease or license to the seller to occupy the home for no more than six months
- Grant a lease or license after the acquisition of the home
Example Case:
Claiming Chain Break Relief for eligible properties
To apply for Chain Break Relief, you need to complete a Stamp Duty Land Tax (SDLT) return and enter the relief code 09.
An SDLT return must be completed to apply for Chain Break Relief.
To complete a Stamp Duty Land Tax (SDLT) chain break return, you need to provide transaction details, buyer and seller information, solicitor details, payment information, and any agreements related to the chain break.
After applying for Chain Break Relief, HMRC will provide a decision on eligibility within 9 months.
Are you owed thousands in Stamp Duty?
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Are you owed thousands in Stamp Duty?
FAQs about Chain Break Relief
Property trading companies and property trading limited liability partnerships.
Decoration costs count as refurbishment. Any costs incurred to bring the property to a liveable standard do not count towards the £10,000 Stamp Duty limit
You must apply within 4 years of purchasing the property.
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A couple wants to sell their only home to move to a bigger house.
They sell their current house to someone who is also selling their property. They buy a house from someone who is also moving. In other words, they enter a property chain.
Months into the process, the couple lose their buyer and the chain fails. A property developer buys their home to help “fix” the chain. This is the developer’s main course of business; buying properties in these situations to refurbish and resell.
All other conditions are met for the property developer and the house in terms of its size. Therefore, the property developer does not pay Stamp Duty.