Stamp Duty Land Tax Series - Some finer detail on your potential stamp duty refund

Last time we looked at the stamp duty land tax (SDLT) situation from an overall perspective. Every property sold in the UK for more than £40,000 has to be reported to HMRC to assess any SDLT payable and whether payment is due or has been made.
 
We looked at some examples of sales at different price levels and how SDLT is calculated during the current holiday and then how it will be calculated when things revert back to normal. The holiday exempts SDLT from any properties purchased for less than £500,000 until 31st March 2021.
 
But let’s go back to basics. What is SDLT and why is it there?
 
SDLT was introduced in the UK in 2003. The object at the time was to eradicate what HMRC saw as ‘aggressive avoidance’ of taxes through very high value transactions. It was then a simple rate times value tax but has slowly evolved into one of the country’s most complex taxes. Now it slices property values and charges a different rate of tax on each slice.
 
When the 3% surcharge was introduced it was intended to supress buy to let landlords stopping people buying properties for the first time. Of course this also hit people who wanted to buy a holiday home or other type of second property which would not affect the first time buyer market.
 
HMRC then began to introduce a number of exceptions, reliefs and qualifying criteria which were intended to ease the burden on these second property owners. What actually happened was that these regulations created a mire which almost everyone could fall into and be swallowed. Professionals such as conveyancing solicitors are still baffled today by the complexities of SDLT. Many of them actually do not understand the rules which have been cloaked upon them by stealth only to add a further layer of accountability to their service. They usually continue to calculate SDLT in the simple way they know, oblivious to the complexities which exist.
 
Other professionals such as accountants, estate agents and mortgage brokers will just refer you to your conveyancer if there are any questions about the SDLT on your purchase. This is because they simply do not understand the tax and how it is calculated.
 
These days HMRC will heavily fine you and charge interest if you underpay your SDLT, which is a self-assessed tax. They are equally cruel in remaining totally silent when there has been an overpayment. If you believe they will voluntarily refund you any overpayment you will have a very long wait. As a third whammy HMRC will fine you on a daily basis if you fail to submit a return reporting your purchase of the property within 14 days of completion; even when no SDLT is payable.
 
Some of the exceptions which had to be introduced are, for example, where a property has an annexe or granny flat. These properties were attractive to buyers who were genuinely caring about an older generation for whom they wanted to provide and yet leave Independent. The acquisition of a consolidated property enabled families to do this for their older generations. But the SDLT swamp soon began to swallow these up. This is just one of 37 exception reliefs which have been introduced to ease the unfair burden on property buyers who have been unfairly disadvantaged .
 
The quagmire continues to deepen as we see the introduction of an additional new surcharge in April affecting buyers who are resident overseas. If you are an expatriate working abroad with roots in the UK and you want to purchase a property here whilst you are resident overseas you will be burdened with this new layer.
 
Then, of course we are currently in the SDLT holiday period which is due to end in a month. Will it be extended to try and account for the stampede of transactions which are underway? If so will that create an even greater stampede?
 
At this time SDLT is a complex property tax which is certainly confusing and unfair to all. However, if you engage a specialist who understands this jungle of complexities and mazes you will find clear and concise advice and action on your behalf to minimise your SDLT burden. The specialist will secure a partial refund if your transaction is within the last four years; the time you have to make a claim.

If you would like an exploratory chat about SDLT in further detail, please contact  Andrew Wood at Kaywood Ltd.