The Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 (Amendments to Schedule 5) Regulations, SI 2024/791, extend the three-year ‘replacement of main residence’ exception and refund period for higher rates residential property transactions in certain circumstances.
The exception is of particular relevance to the higher rates of land transaction tax which otherwise apply where the buyer purchases a second dwelling or multiple dwellings: the higher rates do not apply to the replacement of a main residence.
With effect from 12 July 2024, the regulations extend the normal permitted period (three years) for the disposal of the former main residence or the acquisition of the new main residence where a ‘relevant restriction’ has had a substantial adverse effect on the ability of the buyer to dispose of or acquire a major interest.
A relevant restriction is a restriction or prohibition of an activity by legislation (or by a public authority using powers given to it by legislation) to prevent or mitigate the effects of an emergency (the Covid-19 pandemic would be an example).
Where the former main residence is sold before the new main residence is acquired (sale before purchase) the three-year period can be extended where:
the relevant restriction came into force during the three years beginning with the effective date of the sale of the former main residence;
that restriction had a substantial adverse effect on the buyer’s ability to acquire a replacement main residence before the end of the three years; and
the transaction to purchase the new main residence was entered into on or after 12 July 2024 and as soon as reasonably practicable.
Similar provisions apply where the new main residence is acquired before the former main residence is sold (purchase before sale). In this scenario the higher rates must be paid and a refund claim made. Where an extended permitted period applies, the refund claim must be made within 12 months of the date of the disposal transaction.
One important point to note on land transaction tax rates and bands: the higher rates are generally four percentage points higher than the main land transaction tax rates. However, the bands of consideration to which the rates apply are not aligned. The main rate bands were revised for transactions on or after 10 October 2022, but the bands for the higher rates were not changed. This means that the bands of consideration for the higher rates differ from those for the main rates.
The Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 (Amendments to Schedule 5) Regulations, SI 2024/791, extend the three-year ‘replacement of main residence’ exception and refund period for higher rates residential property transactions in certain circumstances.
The exception is of particular relevance to the higher rates of land transaction tax which otherwise apply where the buyer purchases a second dwelling or multiple dwellings: the higher rates do not apply to the replacement of a main residence.
With effect from 12 July 2024, the regulations extend the normal permitted period (three years) for the disposal of the former main residence or the acquisition of the new main residence where a ‘relevant restriction’ has had a substantial adverse effect on the ability of the buyer to dispose of or acquire a major interest.
A relevant restriction is a restriction or prohibition of an activity by legislation (or by a public authority using powers given to it by legislation) to prevent or mitigate the effects of an emergency (the Covid-19 pandemic would be an example).
Where the former main residence is sold before the new main residence is acquired (sale before purchase) the three-year period can be extended where:
the relevant restriction came into force during the three years beginning with the effective date of the sale of the former main residence;
that restriction had a substantial adverse effect on the buyer’s ability to acquire a replacement main residence before the end of the three years; and
the transaction to purchase the new main residence was entered into on or after 12 July 2024 and as soon as reasonably practicable.
Similar provisions apply where the new main residence is acquired before the former main residence is sold (purchase before sale). In this scenario the higher rates must be paid and a refund claim made. Where an extended permitted period applies, the refund claim must be made within 12 months of the date of the disposal transaction.
One important point to note on land transaction tax rates and bands: the higher rates are generally four percentage points higher than the main land transaction tax rates. However, the bands of consideration to which the rates apply are not aligned. The main rate bands were revised for transactions on or after 10 October 2022, but the bands for the higher rates were not changed. This means that the bands of consideration for the higher rates differ from those for the main rates.
