If you transfer your old home to a trust or a connected company while buying the second home, can you avoid the 5% surcharge on SDLT?

Or if you do it with in the 36 month window can you claim a refund? It is worth understanding what HMRC and the courts actually mean by a disposal before going down that route.

The main residence replacement relief requires you to dispose of your previous home within three years of buying the new one. Most people think of disposal as a straightforward sale to a third party, and in that case it is. The complications arise when the transfer is to someone or something closely connected to you.

HMRC’s position is that a disposal needs to have a real-world effect on who actually owns and benefits from the property. A transfer that keeps the same people in effective control, whether through a family trust where the former owners remain both trustees and beneficiaries, or a connected company they own and control, may not satisfy that test at all.

This was confirmed in a 2025 First-tier Tribunal case, Sajedi and Others v HMRC [2025] UKFTT 297 (TC). Two couples, approaching the end of their three-year refund window, each transferred a 1% interest in their old home to the other couple by way of a declaration of trust. The intention was to create a technical disposal of a major interest and unlock the SDLT refund.

However, the tribunal was not persuaded. It looked past the legal paperwork to what had actually changed in the real world, which was very little. The taxpayers continued to enjoy substantially the same benefits of ownership as before, so the tribunal found no disposal had occurred within the meaning of the legislation. The refund claims failed.

What makes this case particularly notable is that the tribunal raised this point itself. Neither HMRC nor the taxpayers had asked it to examine whether a genuine disposal had occurred. It did so anyway, which tells you something about how seriously the courts are taking perceived SDLT avoidance.

The practical takeaway is simple. If you are planning to transfer your previous main residence to a trust, a company, or a connected party in order to claim the surcharge back, the substance of what changes hands matters far more than the paperwork.

What did you actually give up? If the honest answer is not much, the refund is unlikely to stand.