Posted 16th June 2022 by sdlt-admin
How do I get a Stamp Duty Land Tax Refund?
How much do you know about Stamp Duty, beyond that it’s a tax you pay when you buy a property?
You could visit HMRC’s website to try to expand your knowledge, which does have a wealth of information available. However, most people visit that website to use the calculator it provides for working out the amount due, which is, coincidentally, at the root of a very real issue…
HMRC’s Calculation Issues
HMRC’s calculator, which many may assume is provided solely for the benefit of the public, is in fact the sole officially sanctioned tool provided by HMRC for the purpose of working out the Stamp Duty due on a purchase.
As it is tooled to be as simple as possible, it covers the most basic parameters, and is suitable for a straightforward residential purchase of a single home or a commercial purchase of one, single purpose property. If your transaction differs in any way, small or large, things get a little more complex…
How do define ’dwelling’?
The first speed bump in determining the Stamp Duty on a purchase involves the word ‘dwelling’ and its vague definition in both legislation and case law. Whether a property is a dwelling is important, but other factors are also relevant; does the property have additional separate living spaces contained within it, such as a ‘granny annexe’, a feature seen in more homes in the U.K. as we see a steadily ageing population.
The lack of consistent, concrete guidance on the strict definition of ‘dwelling’ and even what might count as a ‘separate’ dwelling makes working out what you’d think would be quite simple actually very difficult for the average member of the public or their legal advisers.
Is it anything besides a dwelling?
So you’ve worked out whether or not the property you wish to buy is a dwelling. Is that it? Well, not quite. If the property you’re you’re buying is a building that has a shop with a flat above it then the answer to the question ‘Is it just a dwelling?’ is obviously ‘No’.
But defining what’s known in the legislation as a ‘mixed-use’ property is another tricky area.
Does the house you’re buying have land attached? Is that land which would just be grounds or a garden to the property, or is it more substantial?
Are there easements or access rights over that land beside those of the property owner? Is the land used commercially? Is it an agricultural field, grazing pasture or paddock?
Are there substantial outbuildings on the property grounds? Are they in use, and if so as what? Garages and sheds for the use of the householder or something else?
All of these factors should be considered, because they can impact on the amount of Stamp Duty you’re obliged to pay under the legislation.
Why this is important is simple – Mixed-Use properties have their Stamp Duty calculated according to different rates than regular residential property. There is a zero rate band which goes up to £150,000 rather than £125,000, and only two bands above, the maximum being 5% on any portion of the purchase price above £250,000.
This means that on higher end properties, particularly in the £1million+ bracket, the difference between the property being wholly residential or mixed use can be one that makes a difference of thousands or even tens of thousands of pounds to your Stamp Duty bill.
Is it just the one dwelling?
Defining whether a property consists merely of one or multiple dwellings can be difficult as we have seen. Sometimes though, it’s fairly easy, for example if you are an investor buying a block of flats or a row of houses.
The rules originally set up for such investors may also apply outside these narrow confines though. Multiple Dwellings Relief or MDR, is applied, as the name suggests, when more than one dwelling is purchased at the same time, as part of the same transaction.
This relief works by averaging out the value of all properties in the transaction and then basing the SDLT calculation for each on that average value rather than the individual values. The impact of this is relative to the number of properties in the transaction with varying values, and can be enormous in the right circumstances.
However, it may also apply in cases like a residential property with a substantial and separate annexe designed either for elderly relatives or even grown up children unable to buy their own home. If a dwelling can be deemed to be entirely separate, and to fulfil a number of criteria including separate entrances, its own washing and cooking facilities and more, then an MDR claim may be possible and could save you significant sums on your Stamp Duty bill.
What does all this have to do with Refunds?
When your solicitor completes your Stamp Duty Land Tax return, it gets submitted as a personal tax return in the your name. As SDLT is a self-assessed tax, this means the responsibility for its payment and the amount payable is entirely yours as a private individual. In short, if it’s wrong, that means it’s on you to rectify it.
In the case of you having underpaid your Stamp Duty, you can be fairly certain that HMRC will be in touch, though not necessarily quickly! If you’ve overpaid – for example your solicitor has failed to account for some relief, exemption or exception that would be applicable (of which there are 40 in total to date) it’s on you to investigate and make an amendment if necessary.
Usually you have one year in which to submit an amendment to an SDLT return, though in the right circumstances, this may be extended up to four years. HMRC will require a detailed explanation of exactly why the original assessment was incorrect, as well as a fully completed new return to replace it.
So what do I do?
The best way to go about obtaining a Stamp Duty refund is to engage a specialist adviser. Solicitors cannot reasonably be expected to be tax experts, alive to all the nuances of the Stamp Duty legislation or its constant updates, and will often miss elements that could lower your Stamp Duty bill.
A specialist tax adviser, on the other hand, will be able to assess the transaction and determine whether a claim exists, and then pursue that claim quickly and efficiently on your behalf.
One of the many services offered by Cornerstone under the SDLT Refunds banner is a free, no-obligation initial assessment to determine whether a refund is due.
If it is, we can engage with HMRC for you, carrying out all the necessary work and communications, and working with your legal and financial advisers where required. You won’t be billed unless and until we’ve obtained you your refund from HMRC.
So how do I get my money back from HMRC? You contact us:
03333 050954 or email firstname.lastname@example.org to speak with a dedicated adviser and get your claim started.
If you’d prefer, you can complete our simple contact form at sdltrefunds.co.uk and one of our team will contact you directly.