Most investors know they pay higher rates of stamp duty when they buy residential property. Fewer know that a specific relief can remove stamp duty entirely when a property-trading company buys a home to rescue a broken chain.
This guide explains how chain-break relief works. It's general information, not tax advice. Always take advice from a qualified tax adviser before relying on any relief.
What is chain-break relief?
Stamp Duty Land Tax (SDLT) law includes reliefs for property traders who buy homes from individuals in particular situations. One of these covers acquisitions from an individual whose sale has fallen through, where the purchase helps them complete the purchase of their new home. If the conditions are met, the property trader's acquisition is exempt from SDLT. It's claimed on the SDLT return using relief code 28.
Who can claim it?
The buyer must be a property trader: a company, limited liability partnership or partnership whose members are all companies, carrying on a business that includes buying and selling dwellings. Individuals buying in their own name cannot claim it.
The acquisition must be made in the course of that business. For example, a company that regularly buys homes from sellers whose chains have broken.
The main conditions
The individual selling the property must:
- Have arranged to sell their home and buy another one, and the original sale must have fallen through
- Have lived in the home as their only or main residence at some point in the previous two years
- Intend to live in the new home as their only or main residence
And the purchase must be made to enable the seller's onward purchase to go ahead.
There's also a size limit on the land, generally the house and up to half a hectare of grounds. Larger plots may only get partial relief.
When the relief is withdrawn (clawback)
The relief can be lost if, after buying, the property trader:
- Spends more than the permitted amount on refurbishment: broadly the greater of £10,000 or 5% of the price, capped at £20,000
- Lets the property, other than a short lease back to the seller, generally up to six months
- Lets employees, partners, directors or connected people occupy it
So the relief suits a light-touch, buy-and-resell model rather than a heavy refurbishment or buy-to-let strategy.
Why it matters
Companies buying residential property usually face the higher rates for additional dwellings. On a typical purchase, the saving from a valid chain-break relief claim can be significant. That can let a property trader:
- Make a stronger offer to the seller
- Improve their margin on a quick resale
- Compete with other cash buyers on price and speed
How Ready Set Sold helps cash buyers
Ready Set Sold is an estate agent that acts for sellers whose chain has just broken and who still want to buy their next home. That's exactly the situation the relief was designed for.
As a member of our buyer panel you get:
- A feed of chain-break deals, often before they go back on the portals
- One sourcing fee, paid only on completion. We act for the seller, and they're told what you pay us
- Sales progression included: we chase solicitors, searches and the chain
- Conveyancing and bridging introductions if you need them, with any referral fees disclosed
Joining requires proof of funds, ID and anti-money laundering checks, and a signed panel agreement, including our no-late-price-cut commitment.
Frequently asked questions
Can an individual investor claim chain-break relief?
No. The relief is for property-trading companies and qualifying partnerships, not individuals.
Does the seller benefit from the relief?
Not directly. The relief applies to the property trader's purchase. The seller still pays normal SDLT on their onward purchase. The benefit to the seller is that a fast, certain sale keeps their purchase alive, and a trader with lower costs may be able to offer more.
Can I rent the property out after buying it?
Generally only a short lease back to the seller is allowed. Letting it to other tenants is likely to trigger a clawback.
How do I claim it?
The relief is claimed on the SDLT return using relief code 28, usually by your conveyancer. Take tax advice first to confirm you qualify.
Sources: HMRC Stamp Duty Land Tax Manual SDLTM21050; HMRC SDLTM21010.