Stamp Duty Refunds – A comedy of errors?

Stamp Duty Refunds – A comedy of errors?


What is Stamp Duty Land Tax?

To understand the current excitement regarding Stamp Duty Refunds it is important to look at how we arrived at this situation.  Generally called Stamp Duty, or SDLT, Stamp Duty Land Tax is paid by buyers of purchased property. The amount of tax is based mainly on the property’s value. 

Unfortunately, it is also based on other factors that can be difficult to calculate or even understand. In its’ current form Stamp Duty has been with us since 2003.  Confusion has reigned because it is constantly being amended and changed.  This is not ideal for a self-assessed tax and the guidance, also, has been less that ideal.

What has caused Stamp Duty Overpayments?

There are several reasons for the historical overpayment of Stamp Duty (SDLT).  You may have seen recent coverage in the media claiming that overpayments are becoming more widespread. 

Stamp Duty Refunds Frustrated Man
Stamp Duty Rates are Confusing

There is now no doubt that there has been a clear misunderstanding of the Stamp Duty tax rules in an area that affects so many.  Residential buyers, Investors and seasoned property Developers have all had Stamp Duty on their properties incorrectly calculated. 

Surely my Solicitor knew how to calculate my Stamp Duty?

Many U.K. Solicitors and other property professionals have been using ambiguous HMRC guidance on Stamp Duty Land Tax.  HMRC’s Stamp Duty Land Tax calculators have caused frustration and confusion among property professionals.

The calculators are not calibrated to take account of the many variables involved. These variables ultimately determine the exact mount of Stamp Duty due on a transaction. Not very clever!

Some years ago. HMRC admitted to the Press that the calculators were only there for “guidance” and not as a definitive method of Stamp Duty calculation.  Unfortunately, many professionals, who dealt with the purchase of properties, assumed they were always correct.  They used the online tool for all calculations, without additional checks.

Who calculates Stamp Duty Refunds?

Stamp Duty Land Tax (SDLT) is ultimately a tax and, as such, is probably more within the domain of Accountants rather than Solicitors. 

Indeed, here at Stamp Duty Refunds we engage the most experienced tax consultants who specialise in SDLT to unravel the extreme complexity and ambiguous nature of many Stamp Duty calculations.

Accurately assessing and accounting for such variables as woodland, land, granny annexes, holiday accommodations and outbuildings can have a substantial impact on any SDLT due.  Accurate calculation could result in a Stamp Duty Refund, if you have overpaid.

Making an accurate calculation, before the event, can can avoid you making an overpayment and for property Developers, it can make a huge difference in both bidding prices and cashflow.

How Big is this Scandal?

Refunds will be millions of pounds

UK property buyers could be owed a massive £2bn by HMRC for overpaid SDLT, all because a web-based calculator was not up to the task.  The online calculator is intended to identify the amount of Stamp Duty owed when buying a property. It does not, however, account for various reliefs which could may be worth hundreds of thousands.

If a property has a holiday flat, granny annexe, farmland or a commercial building then reliefs should apply. Stamp Duty Refunds seen a 400% growth, in some areas, in claims.  Meanwhile, HMRC is reportedly processing nearly 1,000 cases per month. Solicitors used used the HMRC calculator tool to make calculations on the stamp duty without checking the results.

Some estimates calculate that more than 15% of property transactions may have erroneous Stamp Duty payments.

Is there a refund hidden in your property?
Is there a refund hidden in your property?

HMRC state that most people paid the correct amount and they insist that the online calculator should only be used as a guide.  Solicitors countered by saying that the taxman treated them like accountants and that the calculations required expertise that they did not have. Apparently the calculator does not have an option to class a property as “mixed use”.