Stamp Duty Land Tax: if in doubt, click delete

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Investing in property can be a minefield, especially when it comes to understanding how much Stamp Duty Land Tax (SDLT) needs to be paid. Whilst solicitors are available to guide their clients through this complex process, what happens when a solicitor’s involvement in a particular transaction ceases?

Unfortunately, the number of people being contacted by so-called ‘SDLT reclaim agents’ is on the rise. The modus operandi of these businesses is to submit questionable claims for a refund of SDLT in return for a significant proportion of the rebate.

A key question to ask is: Is this too good to be true?

SDLT reclaim agents most commonly advise their clients, sometimes erroneously, that they have overpaid SDLT because they ought to have claimed some form of SDLT relief on a past transaction, thus entitling them to a refund. Clients may ask themselves, what is there to lose? We advise, however, that anyone considering making a claim for an SDLT refund should do so very carefully before taking any action. This is because HMRC are limiting the application of some of the most commonly claimed SDLT reliefs (such as mixed property relief) in a conscious bid to curtail the use of SDLT reclaim agents. Indeed, HMRC conducted a public consultation last year on plans to change the rules to crack-down on abusive SDLT claims.

SDLT refund agents rely on the fact that HMRC process refund requests swifty, thus ensuring a quick profit for the agent. The pitfall with this for clients is that once the refund has been issued and the SDLT reclaim agent’s fees having been settled, HMRC reserves the right to investigate the claim for a period of nine months following the rebate being made.

Should HMRC discover, upon investigation, that the original tax return was filed correctly, it will seek to recover the refund of SDLT previously made. Since the reclaim agent is likely to have taken its fees directly from the refund obtained, any such repayment to HMRC will necessarily involve the individual in question having to make up the shortfall in tax, along with any interest accruing to HMRC on that sum.

In short, therefore, should you receive correspondence from a business assuring you that it can help you save, in some instances, thousands of pounds in SDLT, it is best to check first with your solicitor and if in doubt, click delete!

We understand that the legislation surrounding SDLT is complicated but we believe that being forewarned is forearmed which is why we’ve put together a 3-part series of articles on SDLT basics. The series, which starts next month, will provide buyers with an accessible overview of some common SDLT pitfalls, as well as provide a basic understanding of the key considerations when preparing to submit an SDLT return to HMRC.

As solicitors we are not tax experts and would always recommend that you seek specialist advice. If, however, you have an enquiry about SDLT and you’re unsure where further to look please do contact our Commercial Property team for guidance.

(March 2023)