Overpaid stamp duty: why buyers and investors could be owed money

 

Stamp duty can be a contentious issue, but most property buyers have to pay it. However, some investors have realised they might have paid more than they needed to…

Anyone buying property in the UK is being urged to double check their stamp duty payment calculations to avoid overpaying tax. The advice comes amid a spate of tax experts coming forward with stories of clients who have found they were owed thousands of pounds by HMRC.

Most recently, tax barrister Patrick Cannon has announced a 285% increase in stamp duty refunds. He puts the recent rise down to people having more time to assess finances during the coronavirus pandemic.

Cannon believes part of the problem lies with people using basic stamp duty calculators to work out their tax. While useful, they do not always account for the complexities of individual situations, and can lead to errors. Conveyancers, he says, can also sometimes make the wrong decision.

“Homebuyers sometimes overpay stamp duty because their conveyancers either don’t have the information they need to decide that a stamp duty relief applies, or they wrongly decide that a relief cannot be claimed.”

He adds: “Conveyancers, on the whole, take a conservative view – many prefer not to make a claim if there is any doubt, so that they do not risk coming into conflict with HMRC.”

Could you have overpaid stamp duty?

For a straightforward home move, the stamp duty calculation is generally straightforward. However, things can be more complicated for property investors.

According to Cannon, some conveyancers believe the 3% surcharge on additional properties is due when it isn’t. Mixed-use properties, for example, are more complex and stamp duty rates are sometimes lower. There are also certain tax reliefs available, such as multiple dwellings relief, which some people aren’t aware of.

David Hannah, from tax advisory Cornerstone, works with many clients who were unaware they were eligible for multiple dwellings relief. In one case, a property development company reclaimed £35,000 in overpaid stamp duty. This was because the £1.4m building they had bought had been wrongly classified at the time of purchase.

What should buyers do?

The advice from David Hannah is for buyers to ask an independent expert to check their tax bill.

He says: “I think they need to get them checked by somebody who is a specialist in the area, because we see altogether too many problems for my comfort.”

“Knowing that the SDLT you are going to pay on your property is accurate could be the difference between buying a house or not and we should be doing all we can to encourage the market back onto its feet.”

Those who believe they could be due a refund can claim it back through HMRC. However, as Patrick Cannon points out, this isn’t always straightforward.

“In most cases the refund claim should be made to HMRC within 12 months and 14 days of completing the purchase, but in certain cases, a period of four years is available,” he says.

“However, in my experience, many people find the process of claiming back their stamp duty complex and time-consuming, especially after the inevitable stress of house-buying, and prefer the reassurance of an experienced adviser dealing with HMRC on their behalf.”

Anyone considering a property purchase should take a look at the HMRC section of the UK government’s website. For stamp duty specifically, there is also a manual available. Property investors in particular are also advised to seek expert tax advice on their purchases.

At BuyAssociation, we can put you in touch with independent tax experts who specialise in property investment. Get in touch to find out more. You can also sign up for free to receive direct information about all our investment opportunities.

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Overpaid stamp duty: why buyers and investors could be owed money

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