SDLT relief for property developers buying from estates: A probate exemption Explained

Property developers acquiring residential properties from deceased estates may benefit from a targeted Stamp Duty Land Tax (SDLT) relief, designed to support the housing market and streamline estate administration. This relief applies under specific conditions and can result in significant tax savings for qualifying transactions.

Who Qualifies?

The relief is available to property traders—companies or partnerships whose business includes buying and selling residential properties. Crucially, the purchase must be made from the personal representatives (executors or administrators) of a deceased individual’s estate.

Key Conditions for Relief

To claim the SDLT exemption, all of the following must apply:

• Business Type: The buyer must be a property trader engaged in property acquisition and resale.
• Seller: The property must be acquired directly from the personal representatives of the deceased.
• Main Residence: The deceased must have occupied the property as their only or main home at some point within the two years prior to death.
• Land Size: The land acquired must not exceed 0.5 hectares (approximately 1.24 acres).
• No Refurbishment or Leasing Intentions: The buyer must not intend to spend more than the permitted amount on refurbishment, grant a lease or licence, or allow occupation by any principal or employee of the business.

Why This Matters

Ordinarily, SDLT is payable when a developer purchases property from an estate. However, this relief provides an exception, recognising the public benefit of returning such properties to the market efficiently. It encourages developers to acquire and resell homes that may otherwise remain vacant or underutilised.

Potential Savings

The SDLT relief can result in substantial savings. For example, a property purchased for £500,000 would normally attract SDLT of £40,000 depending on circumstances. If the transaction qualifies for the probate relief, this SDLT liability could be reduced to £0,. For developers operating at scale, the cumulative benefit across multiple qualifying acquisitions can be significant.

Inheritance vs. Purchase

It’s important to distinguish between inheritance and purchase. Beneficiaries inheriting property under a will or intestacy are generally exempt from SDLT, provided no chargeable consideration (such as assuming a mortgage) is involved. In contrast, developers purchasing from an estate must meet the relief criteria to avoid SDLT.

Legal Reference

This relief is provided under Schedule 6A, Paragraph 3 of the Finance Act 2003, and is detailed in HMRC’s Stamp Duty Land Tax Manual at SDLTM21040.

Professional Advice Recommended

Given the strict conditions and potential tax implications, property developers should seek professional advice before claiming this relief. Proper documentation and compliance are essential, see here: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm21040

For further guidance on SDLT reliefs or probate-related property transactions, please contact our team.