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3% Surcharge – Order of Transactions

In this case study we take a closer look at the application of the 3% surcharge and how it impacts on the order of transactions.

Victoria and Brian are purchasing both a new main residence and an investment property in a relatively short time frame (from unconnected vendors). Their previous main residence was sold at the end of 2019 and they moved temporarily to rented accommodation. The intention was to purchase the new main residence first, followed by the investment property.

Due to the Covid-19 situation, and there being a chain, completion on the purchase of the main residence has been delayed, but the investment purchase is proceeding and will now complete first.


If the purchase of the investment property completes first, condition C will not be satisfied on the basis that Victoria and Brian do not hold a major interest in any other dwellings (anywhere in the world) at the time of purchasing this property.

Therefore the 3% surcharge would not apply to this transaction (as not all conditions A-D are met).

On the purchase of the main residence, although condition C will now be satisfied by virtue of the investment property, the purchase of this property should meet the requirements to be considered a replacement main residence so that the 3% surcharge will also not apply (because condition D is not met).

The fact that the investment property was purchased first does not prevent the application of the main residence exception, because it was not bought with the intention of being the purchaser’s only or main residence. The couple will also need to purchase the new main residence within 3 years of sale of the previous property (and to have lived in the previous property at any time in the 3 years before sale) to qualify for this exception.

Conversely, if Victoria and Brian were to purchase the main residence first and then acquire the investment property, the outcome would be different.

The standard rates of SDLT would apply to the main residence purchase (because the couple would not own another property and it would qualify as a replacement main residence) but the 3% surcharge would apply to the purchase of the investment property (because the couple would own another property and this transaction would not qualify as a replacement main residence).

The unintended sequence of events has therefore saved Victoria and Brian some SDLT.

If you have any queries around SDLT please do not hesitate to get in contact via our SDLT Advisory Service.

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