How can you tell if you have overpaid Stamp Duty?
Overpaying Stamp Duty often happens these days because of the enormous complexity of the Stamp Duty land tax (SDLT) rules. For example, there are five different tables of rates of Stamp Duty and some extremely complicated reliefs such as Multiple Dwellings Relief and the relief for “granny annexes” within the Stamp Duty 3% surcharge for second homes.
There is also a great deal of uncertainty as to what a “dwelling” is for SDLT and when to classify a property as mixed residential and non-residential use. All of these factors affect the correct rate of Stamp Duty tax paid, and conveyancers often err on the side of caution and advise their clients to pay higher rates of SDLT, when on closer inspection this turns out to be too much.
“Which” magazine has estimated that 15,700 buyers paid the Stamp Duty surcharge when they should not have done so. It is little wonder that so many purchasers are seeking a Stamp Duty refund on a second home or for the purchase of what turns out to have been a mixed-use property.
How can you claim Stamp Duty back?
To apply for a refund of the 3% Stamp Duty surcharge see here. In other cases HMRC’s guidance advises that you apply for a refund by writing to the Stamp Duty Land Tax Office and include:
- the UTR Number
- copy of the original SDLT return
- reason why you think you’ve overpaid
- the parts of the SDLT return which are wrong
- revised figures and confirm the amount of refund due
- contract for the land transaction (if appropriate)
- the instrument (if any) by which the transaction was effected – this is generally the relevant transfer document, the lease or similar document
Who does the 3% SDLT surcharge on additional properties apply to?
The Stamp Duty surcharge applies to individuals buying a second or additional residential property, and to companies and other non-natural persons buying a first or additional residential property. The rules are extremely complicated for what seems to be a simple and straightforward objective of imposing a stamp duty surcharge on second homes and buy to let residential property.
For example, if the property you are buying has a “granny annex”, then you may be treated as if you were buying two dwellings for the purpose of the Stamp Duty surcharge. However, if one of the dwellings is worth at least 2/3rd of the entire value, then you can ignore the “subsidiary dwelling” for the purpose of the 3% surcharge. You can still take that dwelling into account for the purposes of reducing the stamp duty chargeable using the Multiple Dwellings Relief or MDR. You can read more about this here and here.
A Stamp Duty refund may also be available if you paid the 3% surcharge on the purchase of your replacement main home before you sold your old main home, and if you then sell the old home within three years.
Is there a deadline for SDLT refund claim appeals?
Yes, the basic rule is that a refund claim cannot be made more than 12 months after the filing date for the original SDLT return, ie 14 days after completion of the original purchase. However, in certain special cases, a Stamp Duty refund claim can be made to HMRC up to 4 years after the transaction concerned.
In the case of selling your previous main residence within three years after buying your replacement main residence, you have 12 months from that sale to claim a refund of the 3% surcharge.
Even if the time limit for a refund claim against HMRC has run out, there may still be grounds to claim against your professional adviser and their insurers if they wrongly caused you to overpay Stamp Duty. Normally, you have six years from the date you pay Stamp Duty to make such a claim or, if greater, 3 years from when you could have discovered that you had overpaid.
How long does a Stamp Duty refund take?
In my experience, HMRC will issue the refund within a month or so, although in certain cases where a known claims firm is involved with a history of making dodgy refund claims, they may withhold any refund while they enquire into the claim.
Even if HMRC pay the refund promptly, they will often then open an enquiry into the refund claim to check that the facts meet the conditions for the relief claimed. If following their enquiry, they decide that the refund should not have been made, they will issue a closure notice requiring repayment of the tax claimed. This decision can, where appropriate, be appealed to the tax tribunal.
HMRC’s online Stamp Duty calculator can be found here, but be careful when using the SDLT calculator because it does not allow for reliefs and exemptions, such as multiple-dwellings relief.
How Patrick Cannon can help with your appeal
If you think that you have overpaid Stamp Duty on your residential purchase because, for example, MDR might have applied, or the property was derelict, then I can assist by advising you on making a refund claim to HMRC and, if necessary, appealing an HMRC decision to the tax tribunal on your behalf. Unlike many firms advising in this area, I give clear advice, charge an agreed fixed fee upfront, and do not seek a percentage of the tax saved.
Should you ask Patrick Cannon to assist you?
Given the significant amount of Stamp Duty now at stake, any potential refund is likely to be valuable and justify the time spent looking into it. If you think that there may be grounds for claiming a Stamp Duty refund then get in touch today using the contact form below.
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For professional and insurance reasons Patrick is unable to offer any advice until he has been formally instructed.