"Buyer - and taxpayer - beware": Homebuyers warning as HMRC gets tough on bogus Stamp Duty claims
HOMEBUYERS are being warned to avoid Stamp Duty Land Tax scams, following a landmark Court of Appeal decision.
HM Revenue and Customs (HMRC) has today announced that people purchasing properties need 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.
HMRC says this confirms its 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 says it will take 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.”
Michelle Lawson, Director at Fareham-based Lawson Financial, urged buyers to be cautious and to seek advice: “Where there is a loophole, there is always someone in the wings waiting to take advantage. But with this HMRC announcement, it's very much a case of buyer - and taxpayer - beware. There are reliefs available but it is more important than ever for buyers to take appropriate tax advice at the outset rather than risk being penalised further down the line."
Rohit Kohli, Director at Romsey-based The Mortgage Stop, said the matter isn't being helped by the rise in finfluencers: “This was always a grey area, but plenty of finfluencers were all too happy to promote it as a loophole. The idea that a slightly run-down property could be classed as ‘non-residential’ to dodge stamp duty was never as clear-cut as some claimed. The outcome of this case isn’t all that surprising when you think about it.
"HMRC’s warning is long overdue, and it will come as a shock to those who acted on poor advice. Buyers should be extremely wary of anyone promising easy refunds on tax already paid. If you’re relying on an agent’s word, you could end up footing the bill twice, plus penalties and interest.”
Daniel Hobbs, CEO at Essex-based New Leaf Distribution, added: “If it feels too good to be true, it usually is. If approached by people or agents offering to save them money on stamp duty, buyers need to tread very carefully or they could end up in hot water with HMRC.”
Babek Ismayil, Founder at UK-wide homebuying platform, OneDome, also urged caution: “Buyers need to be very wary of any schemes that offer the ability to save on stamp duty, as they can often come with a sting in their tail. Always seek tax advice from an expert to ensure that you do not end up paying way more than you tried to save.”
David Stirling, Director at Belfast-based Mint Mortgages & Protection, said: "As with any "Get Rich Quick Scheme", borrowers should be on high alert. Whilst it may be tempting to take a chance on avoiding tax with a view that you may never get caught, this isn't great advice, as the penalties and fines will be punitive. Claims companies come and go overnight, so due diligence should be used against any advice taken or paid for."
