Caution urged for buyers approached by rogue companies offering SDLT refund assistance.
Buyers who have recently purchased property are being urged to exercise caution when approached by rogue companies claiming to help them obtain refunds on Stamp Duty Land Tax (SDLT) paid to HM Revenue and Customs (HMRC).
These companies often suggest that buyers are eligible for multiple dwellings relief or can benefit from lower commercial rates due to specific property characteristics. However, SDLT is a complex tax, and buyers should carefully review their SDLT obligations before exchange of contracts, rather than after completion.
Some of these approaches are made on dubious grounds or rely on arguments currently being challenged by HMRC through legal proceedings.
While HMRC processes repayment claims swiftly, treating them almost as an automatic process, the thorough assessment of these applications is conducted at a later stage. This means that HMRC may request buyers to repay reclaimed tax with interest when the rogue company that made the claim no longer exists or has disappeared.
Furthermore, buyers may be subject to penalties of up to 100% of the tax refund, leaving them in a worse financial position than if they hadn’t made a refund claim at all.
Outlined below are examples of the types of invalid claims buyers may be encouraged to make:
Case Study 1: Mixed-use transaction
In mid 2019, Jessie purchased a five-bedroom detached house with expansive landscaped land in the countryside. Her solicitor advised her to pay the residential Stamp Duty Land Tax (SDLT) rate, resulting in an SDLT payment of £127,250 for the property, which cost £1,800,000.
After the purchase, Jessie received a letter from a company called ‘SDLT Pro’ claiming that she might have overpaid SDLT and could be eligible for a refund. SDLT Pro asserted that due to a public footpath running across a portion of her land, that specific part should be considered non-residential, creating a ‘mixed transaction.’
SDLT Pro informed Jessie that she should have paid £81,000 in SDLT and could potentially receive a refund of £46,250. They claimed to have successfully secured refunds from HMRC in similar cases.
Jessie decided to engage SDLT Pro as her agent and authorised them to write to HMRC, requesting an amendment to her SDLT return and a repayment based on the assertion of a mixed transaction involving residential and non-residential land.
HMRC processed the refund of £46,250 as SDLT Pro had made a valid amendment, without conducting detailed checks into the grounds for the refund at that time.
However, near the end of 2019, HMRC initiated a review of Jessie’s SDLT return. After careful examination, HMRC determined that Jessie had indeed purchased a residential property and that the refund was not warranted. SDLT Pro had provided Jessie with incorrect advice regarding the impact of the public footpath.
Crucially, SDLT Pro failed to inform Jessie that according to HMRC guidance, rights of way such as public footpaths would not classify a transaction as ‘mixed.’
Consequently, Jessie is now required to repay the £46,250 refund along with additional interest. Furthermore, HMRC will consider whether a penalty should be imposed, which could amount to up to 100% of the refund originally given.
The numbers used are purely for an example and may not be accurate. This example is based around a case study at www.lawsociety.org.uk
It is important to note that even when an agent acts on behalf of an individual, there is no exemption from potential penalties as Stamp Duty Land Tax (SDLT) is a self-assessed tax.
This is just one example and buyers are advised to exercise caution before making unfounded claims for SDLT refunds. It is important to be aware of the potential risks and to make informed decisions regarding SDLT obligations. The government is actively seeking long-term solutions to make the SDLT system fairer and reduce the possibility of incorrect claims and misuse.
To learn more about the risks associated with SDLT refund claims and the proposals for reform, buyers can refer to HMRC’s guidance and resources, such as “New homeowners warned over tax refund claims” and the Chartered Institute of Taxation’s article titled “Stamp duty refunds: too good to be true?“
By being informed about the potential risks and exercising independent judgment, buyers can protect themselves from unnecessary financial liabilities and ensure compliance with SDLT regulations.
CSD strongly advises its clients about the risks associated with engaging rogue companies that claim to provide assistance with Stamp Duty Land Tax (SDLT) refunds. These companies often make enticing promises but may ultimately expose individuals to potential harm and financial liabilities.
We understand the allure of seeking help with SDLT refund claims, especially when dealing with complex regulations. However, it is essential to exercise caution and choose reputable and trusted partners like CSD. Rogue companies can mislead clients, make incorrect claims, and leave individuals facing significant tax bills, penalties, and legal consequences.
At CSD, we prioritise the best interests of our clients. With our expertise and extensive knowledge of SDLT regulations, we offer reliable and professional assistance throughout the refund claim process. Our goal is to minimise risks, ensure compliance, and maximise the chances of successful refund outcomes.
When seeking help with SDLT refunds, it is crucial to thoroughly research and verify the credentials and reputation of any company you consider working with. Protect yourself from potential scams and fraudulent practices by choosing CSD as your trusted partner. We are dedicated to providing transparent, reliable, and ethical services that prioritise your financial well-being and safeguard you from unnecessary risks.
Contact CSD today to receive professional assistance and peace of mind in your SDLT refund claims. Let us guide you through the process and ensure your interests are protected every step of the way.
