Introduction To Stamp Duty And Interest Charges

I am often asked by clients who have to pay overdue stamp duty whether they can negotiate with HMRC over the amount of the stamp duty interest in the same way that the amount of stamp duty penalties can sometimes be discussed with HMRC. The answer is no. HMRC will not negotiate the amount of interest. The reason is that the interest charge is laid down in statute, and you have had the use of the money when, as it turns out, that money should have been paid to HMRC. HMRC are therefore being compensated for being kept out of funds that should have been paid to them.

What is HRMC’s policy on stamp duty and interest?

Interest is payable on the amount of any unpaid SDLT after 14 days from the effective date of the transaction. In the case of the withdrawal of group relief, reconstruction or acquisition relief or charities relief giving rise to tax, interest is charged after 30 days following the disqualifying event. However, where contingent, uncertain or unascertained consideration is not deferred under FA 2003, s 90, interest on any tax that becomes payable under FA 2003, s 80 (adjustment where the contingency ceases or consideration becomes ascertained) runs from the effective date of the transaction: FA 2003, s 87(5). An amount of tax lodged with HMRC in respect of the tax will reduce the interest payable accordingly: FA 2003, s 87(6).

How does HMRC calculate that interest on Stamp Duty?

HMRC charge interest on overdue SDLT at the statutory rates specified in regulations made under under FA 1989, s 178. A repayment of SDLT (including an amount lodged under FA 2003, s 87(6)) carries interest at the rate applicable under FA 1989, s 178 between the payment of the tax and the repayment (unless it is a payment made in consequence of a court order or judgment of a court having the power to allow interest on the payment). Any such interest paid is not income for tax purposes: FA 2003, s89(5).

Currently (7 June 2023) the rate of interest charged on overdue SDLT is 7% (being BoE base rate plus 2.5%), and the rate of interest on repayments is 3.5%. Repayment interest is set at a base rate minus 1%, with a lower limit of 0.5% (the ‘minimum floor’). A table of historical rates of interest can be found here.

Do stamp duty penalty charges attract interest?

Penalties carry interest from the date they are determined until payment at the same rate as that charged on unpaid stamp duty under FA 2003, s 88.

When is interest charged on stamp duty?

Interest is payable on any unpaid SDLT after 14 days from the transaction’s effective date. However, if you are in dispute with HMRC about whether stamp duty is payable, you can deposit or “lodge” the disputed amount with HMRC pending resolution of the matter and interest will cease to run on that amount once lodged because an amount of tax lodged with HMRC reduces the interest payable accordingly: FA 2003, s 87(6). Repayment interest will apply to any amount eventually refunded.

How is late payment interest worked out on stamp duty?

HMRC charge interest on overdue SDLT at the statutory rates specified in regulations made under under FA 1989, s 178. A historic table of interest rates can be seen here.

Does HMRC add interest to SDLT refund claims?

Yes, a refund of SDLT (including an amount lodged under FA 2003, s 87(6)) carries interest at the rate applicable under FA 1989, s 178 between the tax payment and the repayment.

Conclusion 

I can advise on stamp duty interest charges and penalties, including disputes with HMRC about the correct amount of interest payable when a stamp duty refund has been paid with repayment interest but then the refund becomes repayable to HMRC. Get in touch with me here.