Stamp Duty Land Tax is a significant bill when you buy a property or piece of land. Unfortunately, just like other taxes, it must be paid.
Those who attempt to underpay or avoid paying their Stamp Duty altogether face hefty fines and penalties. Some property buyers also overpay their Stamp Duty by failing to take advantage of schemes and exemptions that can save them money.
In this article, we are going to look at some of the reasons why you might be able to claim an SDLT refund. We will also cover the steps you can take to get a stamp duty refund from HMRC. We will begin by covering the basics first.
What is SDLT?
Stamp Duty is a type of tax that applies exclusively to purchases of property and land in England and Northern Ireland. Wales and Scotland have similar tax schemes, known as the Land Transaction Tax (LTT) in Wales and the Land and Building Transaction Tax (LBTT) in Scotland.
The amount of stamp duty you will pay varies according to your status and the price of the property or land. For example, first-time buyers are exempt from the charge and anyone buying a second home pays an enhanced rate of stamp duty.
No VAT is due on SDLT, luckily. SDLT is payable on any purchase over £125k unless you are a first-time buyer. It is due whether the property is leasehold or freehold.
What is Stamp Duty Refund?
Sometimes a part or all of your stamp duty can be refunded if your property sale meets certain conditions; this is known as stamp duty refund. It’s worth asking your conveyancing solicitor whether you may be due a refund at some point, as they can advise you based on the intricacies of the purchase.
Am I Due an HMRC Stamp Duty Refund?
You can be forgiven for thinking that with so many guidelines in place, and with so many property purchases made every day in England and Northern Ireland, that calculating and paying SDLT would be straightforward, but this is often not the case.
There are, surprisingly, many situations where buyers discover they are due an HMRC stamp duty refund on their property purchase.
When buying a second home, you may be entitled to a refund if you sell your primary home within three years of buying the new property. Very few people know this, and fewer still follow through with their claim and get a stamp duty refund.
Stamp Duty Refunds: SDLT on Annexes
You can also claim a stamp duty refund in the UK for houses that have an annexe. This is a common reason why people claim a stamp duty refund, yet few people know about it and reclaim the money that is rightfully theirs. If you have bought a property that has an annex, ‘granny flat’, or another small building of this nature on the property, then you may be entitled to an HMRC stamp duty refund.
This is thanks to a change in regulations in 2018 that meant that properties with a separate annex or a building attached to their property are considered one home rather than two distinct properties. The refund available can be quite significant. The main building on the property must comprise more than two-thirds of the overall property value to qualify.
If you bought a shared ownership property as a first-time buyer after November 2017, then you could also be entitled to a sizable stamp duty refund. This also applies to new purchases, so if you are buying your first property under a shared ownership agreement, you will be exempt from stamp duty, as long as the value of the property is under £500,000.
Possibly the most well-known reason for receiving a stamp duty refund is when you have paid SDLT on uninhabitable buildings. This instance was made famous in recent years by a high-profile court case that received attention from the national newspapers and television.
Stamp Duty Refunds: SDLT Court Case
Paul and Nikki Bewley purchased a derelict bungalow for £200,000 as an investment in January 2017. Their intention was to let the property, after undertaking necessary and extensive renovations. The building had asbestos that needed to be removed and did not have a working central heating system. When inspecting the property, they discovered that it would be more cost-effective to demolish the derelict building and construct a new property on the site. One of the expenses they thought this strategy would avoid was the buy-to-let stamp duty surcharge, as the property they bought was uninhabitable and being demolished. They paid the £1,500 stamp duty bill but HMRC believed the couple still owed £7,500 because the property was not their primary residence.
The Housing Act of 1967 clearly states that in order for a house to be considered habitable, it must have suitable living facilities that includes the basics of hygiene, heating, and a functioning kitchen. The Bewley’s property had none of these things, and so should not have been regarded as habitable, or as a home. HMRC disputed this on the grounds that the property would one day have a habitable building on its land, which would be let to a tenant, and therefore the property purchase was liable for the added buy-to-let surcharge.
The court case that ensued eventually disagreed with HMRC and found in favour of the Bewleys. They decided that as the property was not fit for habitation, the couple should not have to pay the added surcharge.
How Long to Get Stamp Duty Refund?
This ruling opened the floodgates for hundreds of old SDLT bills to be questioned, and a wave of stamp duty refund claims hit Her Majesty’s Revenue & Customs. Many landlords across the country had paid the full surcharge, despite buying uninhabitable houses that needed considerable renovation before they could be let to tenants. HMRC are still working their way through these historical claims, and it potentially has to repay millions of pounds in stamp duty refunds.
The most common reason for making a stamp duty refund claim from HMRC is that your property value, and the amount of stamp duty you were liable for, was miscalculated. Her Majesty’s Revenue & Customs has an online stamp duty calculator that most people, including solicitors and property management companies, use to find out how much stamp duty they owe. Recently it was discovered that this online tool wasn’t always accurate, and many people may be owed a stamp duty refund.
HMRC has since made it clear that the tool should only be used for guidance or to give an estimate for how much stamp duty you should pay. Many people, including professionals like solicitors and property developers, used this calculator to make their final stamp duty calculations. It is estimated that one out of every six property buyers may have overpaid their stamp duty. The government suggests that this figure is over-inflated, and it reminds people that most property purchases will have incurred the correct amount of stamp duty. However, it seems a lot of people may be entitled to a stamp duty refund for this reason.
How Long To Get Stamp Duty Refund?
Stamp duty refunds are quite easy to apply for, and it can be done by post or online. There are solicitors and property companies like Greater London Properties that can help you through the stamp duty process for extra peace of mind. Some applications can be more complicated than others, especially if it is a historical claim.
Stamp Duty Refunds: Stamp Duty Refund Contact Number
There is a stamp duty refund contact number that you can use for additional advice and begin making a stamp duty refund claim from HMRC. The stamp duty refund contact number is 0300 200 3510.
How Long Does Stamp Duty Refund Take?
With the right information in the right order, you will be able to supply HMRC with everything they need to process your application quickly. If all your paperwork is in order, the process should only take 15 days. In the event the claim takes longer to process, you will be entitled to interest earned on the refund amount for the additional time it takes.
Stamp Duty Refund UK
Sometimes getting a refund from HMRC (Her Majesty’s Revenue & Customs) can be difficult, and navigating their various forms and departments can take some time. Greater London Properties is here to help you through every part of the property purchase process. The team has decades of experience in the property market and can advise you on stamp duty when you are buying a property, and how to make a claim for a stamp duty refund.
Stamp duty is always a significant cost that you should consider when buying a property. It is also important to make sure you are not paying more than you owe and that you know how to get a stamp duty refund from HMRC if you need to.
Hopefully, this guide has given you enough information to prepare you for paying your stamp duty, and shown how to get a refund if you discover you are entitled to one.