HMRC is actively pursuing dishonest agents who make false Stamp Duty Land Tax repayment claims
- Landmark Court of Appeal decision confirms that properties needing repair remain chargeable to residential rates of SDLT.
- Homebuyers warned about rogue agents advertising misleading SDLT repayment claims.
Homebuyers are being warned to avoid Stamp Duty Land Tax scams, following a landmark Court of Appeal decision.
HM Revenue and Customs (HMRC) is warning people purchasing properties to be vigilant of tax agents offering to secure Stamp Duty Land Tax (SDLT) repayments on their behalf where repairs are needed to a property they have bought.
Some agents have suggested that, for a fee, they can reclaim SDLT the buyer has already paid by saying that the property is non-residential because it's uninhabitable. But making claims of this kind often leave the homeowner liable for the full amount of SDLT, plus penalties and interest.
A recent Court of Appeal judgment in the case of Mudan & Anor v HMRC has confirmed that housing ("dwellings") in need of repair are chargeable at the residential rates of SDLT, and that repayment claims based solely on a property's condition are not valid.
This decision confirms HMRC's long-standing view that if a property requires repairs but retains the fundamental characteristics of a dwelling, it is still suitable for use as a dwelling and attracts residential rates of SDLT. A key factor in determining suitability is whether a property had been previously used as a dwelling.
HMRC is taking decisive action on spurious SDLT repayment claims, using civil and criminal powers to deal with the minority who undermine the tax system.
Anthony Burke, HMRC's Deputy Director of Compliance Assets, said:
The Court of Appeal's decision is a major win, protecting public funds. Homebuyers should be cautious of allowing someone to make a Stamp Duty Land Tax repayment claim on their behalf. If the claim is inaccurate, you could end up paying more than the amount you were trying to recover.
Anyone who is unsure of the rules should check the SDLT guidance on GOV.UK.
As an example, if Joe bought a house in London for £1,100,000 and his solicitor filed the SDLT return, SDLT was calculated at the residential rates (£53,750). As the house required modernisation and repair, Joe couldn't move in straight away. The house needed a new boiler, rewiring and damp proofing.
Shortly after moving in, Joe received an advert in the post from a repayment agent which incorrectly suggested that due to the required repairs they could get him a refund of SDLT on a 'no win, no fee' basis. In Joe's case the refund amounted to £9,250 (the difference between residential and non-residential rates), less the agent's 30% fee. Joe agreed for the agent to make a claim on his behalf, and he received his repayment. Later in the year, HMRC opened a compliance check into the repayment claim and concluded that the property was residential.
Consequently, Joe found out that he owed £9,250 SDLT, plus interest and a penalty, even though the agent only sent him £6,475, after deducting their fee. He is now out of pocket as the agent refused to cover the interest and penalty and the agent has since refused to respond to his emails and phone calls.
