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Stamp Duty Land Tax

What is Stamp Duty Land Tax?

Stamp Duty Land Tax (“SDLT”) becomes payable by a buyer, once a residential property is bought for £500,000, or when non-residential land and properties are bought for £150,000 in England and Northern Ireland.

The filing date for the SDLT return, and the payment date is within 14 days after the effective date of the transaction. The effective date is usually the completion date for the purchase of the property.

Statistics show that 20% of Stamp Duty Land Tax (“SDLT”) returns may have been incorrectly completed which will have resulted in millions of pounds of overpaid SDLT to HMRC.

How to calculate SDLT

A solicitor has several options when instructed by a buyer of property where SDLT must be calculated and paid to HMRC.

The options are:

1. Advise the client to instruct a specialist SDLT adviser to calculate all of the available tax reliefs and exemptions, complete the tax return and arrange payment of the SDLT to HMRC, or

2. Provided that the solicitor has sufficient specialist knowledge in respect of available tax reliefs and exemptions, complete the tax return using the HMRC online calculator, and arrange payment of the SDLT to HMRC within 14 days of the effective date of the transaction.

A solicitor acting for buyers of property might advise, and elect to calculate the amount of SDLT payable using the HMRC’s Stamp Duty Land Tax Calculator.

However, the use of the calculator is merely a “guide”, and it is not equipped to deal with all the SDLT reliefs and exemptions that may apply to any given property.

Hence, there is a substantial risk that if a solicitor calculates the SDLT, it may be incorrectly calculated and may result in a substantial overpayment of SDLT.

SDLT Reliefs and Exemptions

When calculating SDLT it is fundamental requirement that the solicitor acting on behalf of a client has the required specialist knowledge of all the available tax reliefs and exemptions so that the amount of SDLT that is payable to HMRC is correct.

If the calculations are incorrect then this will result in an overpayment of SDLT to HMRC which can create the following potential scenarios:

1. The solicitor makes an overpayment of SDLT which is never subsequently discovered.

2. The specialist SDLT adviser makes an application to amend the original SDLT return and obtains a refund of the overpaid SDLT (without any recovery of any lost interest, or interest paid in respect of any financial loan) within 12 months of the filing date of the SDLT return (i.e. within 14 days of the effective date of the transaction).

3. Within 4 years of the effective date of the transaction a specialist SDLT adviser makes an application to HMRC as provided by the Finance Act 2003 for a refund of overpaid SDLT (without any recovery of any lost interest, or interest paid in respect of any financial loan) which is usually paid within 10 weeks of the application being made.

There are approximately 30 different exceptions and exemptions which may apply in respect of the availability of SDLT overpayments.

Examples of things that may prove relevant in the calculation of Stamp Duty Land Tax on property include:

  • Annexes – many people fail to realise that a ‘granny annexe’ may qualify a property for relief
  • Other Land – if the property has land attached to it which is more than a simple garden.
  • Mixed-Use – if the property has or has had commercial activity in its buildings or on its land
  • Any form of income from the land e.g., rents, license fees, certain wayleaves, etc. If it gives you taxable income, then it will affect the Stamp Duty.
  • Rights or interest over the land that do not benefit the dwelling itself i.e., common rights

Accordingly, a specialist SDLT adviser is required to calculate the applicable reliefs and exemptions to maximise the repayment of monies overpaid to HMRC.

Limitation period for repayment of any excessive charges paid to HMRC

The Finance Act 2003 provides that if a mistake has been made when calculating the SDLT, a claim for repayment of any excessive charges can be made within 12 months of the filing date of the SDLT return, by amending the SDLT Tax Return.

 

In respect of a mistake which is discovered after 12 months of the filing date, and within 4 years of the effective date of the transaction then paragraph 34 of Schedule 10 of the Finance Act 2003 provides that a claim can be made to HMRC for repayment of any excessive charges.

 

The claim is usually made by a specialist SDLT adviser instructed by the client.

Law Society Guide with regards to instructing a specialist SDLT adviser

The Law Society published a guide on the 29th of March 2021 with regard to solicitors advising on SDLT and they stated as follows:

 

“…A solicitor who does not have the necessary specialist knowledge of tax should not advise on it and may need to advise clients to obtain specialist advice, especially in relation to higher risk transactions….”

 

Hence the Law Society recognise that there are potentially voluminous transactions where the SDLT has been overpaid as a direct result of a solicitor without the specialist knowledge of tax, and without any subsequent specialist SDLT adviser checking the previous calculations. Hence, any overpaid SDLT may never be discovered.

Howdens report that solicitor’s insurers are seeing a significant increase in claims arising from a failure to apply Multiple Dwellings Relief (MDR) from SDLT resulting in massive overpayment of SDLT

At a roundtable hosted by Howdens and SDLT Compass Hannah Mackinlay reported that there are currently 49 different reliefs from SDLT available.

Find out more here. She explained that the SDLT Calculator on gov.uk:

 

“…will work out the SDLT payable for most transactions. You should check the guidance if you are uncertain about how SDLT applies to your purchase, or if you believe it may qualify for a relief…”

 

Hence, combined with the Law Society guidance released in March 2021 it is apparent that the SDLT issue has become increasingly problematic.

Our mission

We can arrange for a team of specialist SDLT advisers, solicitors, and barristers to assist claims to be pursued for recovery of losses caused by solicitors having overpaid SDLT to HMRC.

 

The team of specialist SDLT advisers will provide you with an initial free of charge consultation of your SDLT position to in order to verify the amount that you may be able to be reclaim from HMRC.

 

If monies can be reclaimed from HMRC then the specialist SDLT tax advisers can act on your behalf, and they will provide their services on a no win, no fee basis to recover your overpayments to HMRC.

 

Thereafter, we can arrange for you to instruct a legal team to act of your behalf to seek to recover the fee charged by the specialist SDLT adviser from the legal firm’s insurers which acted on your behalf in the conveyancing transaction, and which resulted in the overpayment of SDLT to HMRC

 

They will also provide their services on a no win, no fee basis.

Request a consultation

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