Overpaid Stamp Duty refunds from HMRC
Stamp Duty Land Tax (SDLT) refunds may be claimed from HMRC when buying a home, a second home, or a buy-to-let property investment.
Paying the correct SDLT tax due on a property is important.
Claiming back SDLT on a property purchased can be complex.
What are the basics?
Stamp Duty Land Tax (SDLT) is what you pay on property or land purchases in England and Northern Ireland.
The amount of SDLT you pay depends on your buying status (landlord, first-time buyer, or purchasing a holiday home or buy to let property) and the property’s price is all factored into the equation.
Not all of these are obvious to conveyancers and property solicitors, some of whom simply differentiate between whether a property is residential or commercial for SDLT calculations in the UK.
Making a claim for SDLT can be confusing, and with little help from HMRC, many property purchasers struggle to complete accurate returns.
It is recommended that all property buyers review HMRC guidance on SDLT Returns.
How can you tell if you've overpaid Stamp Duty?
Overpaying Stamp Duty is commonplace due to the complexity of SDLT rules.
There are five different rate tables of Stamp Duty and some complicated reliefs such as Multiple Dwellings Relief (MDR) and the relief for ‘granny annexes’ within the SDLT 5% surcharge on second homes.
There is also confusion about what a ‘dwelling’ is for SDLT and when to classify property as mixed residential and non-residential use.
These factors affect the amount of Stamp Duty you pay, and conveyancers often advise clients to pay higher rates of SDLT.
Some property buyers have found issues with the HMRC’s SDLT calculator, which is designed only for basic transactions and calculations.
This functional tool provides estimates based on narrow criteria, and without the correct inputs, it will give misleading figures to pay.
Conveyancers and solicitors are expected to deal with a self-assessment return for each client in the form of SDLT returns.
This requires them to calculate the correct amount of tax on the client’s behalf and to complete lengthy SDLT returns for the client to sign.
Who is eligible to claim SDLT refunds?
Second homes
If you sell your main residence within three years of paying higher rates of stamp duty of 5%, you will be eligible to claim a stamp duty refund on your second home surcharge.
For property sold on or after October 29, 2018, your SDLT claim must be received by HMRC within 12 months of the main residence being sold or within a year of the new residence’s Stamp Duty filing date, whichever is later.
Houses with an annexe
This is a common reason for making a Stamp Duty claim, and many people are unaware they may have overpaid SDLT.
If you pay a surcharge on a property with an annexe, granny flat or similar smaller building on the grounds of your main home, you may be able to make a claim to HMRC on the SDLT you pay.
Any property with a self-contained annexe on the grounds is now regarded as a single home rather than two different properties, as long as the main building is worth at least two-thirds of the property’s overall value.
If your property falls into this category and your purchase was made before the changes in 2018, you could be eligible for a sizeable refund on the SDLT paid.
Shared ownership for first-time buyers
Shared ownership property purchased by first-time buyers is exempt from Stamp Duty Land Tax, providing the property value does not exceed £500,000.
This SDLT relief can also be applied retrospectively, which means that if you bought a shared ownership property as a first-time buyer on or after November 22nd 2017, you may be eligible for a refund.
Uninhabitable buildings
Under the Housing Act of 1967, to be regarded as habitable, a property must have suitable facilities to meet basic needs, such as maintaining hygiene and means to be able to cook.
Hundreds of old Stamp Duty surcharges could be called into question by landlords who have previously paid the top SDLT rate for a property that needed renovation to make it habitable.
HMRC claim backs are reimbursements of SDLT that homebuyers or property investors can claim if they meet specific criteria, such as selling their previous main residence within a certain timeframe after purchasing a new one.
You may be eligible for a money back from HMRC if you have paid higher rates of SDLT on an additional property and subsequently sold your previous main residence within three years. Additionally, you must claim the refund within 12 months of selling the previous home or within 12 months of the SDLT return filing date, whichever is later.
You need to complete the appropriate refund application form available on the HMRC website. You must provide details of both property transactions, including dates, amounts paid, and evidence of the sale of your previous main residence. Submitting all required documents accurately will expedite the process.
HMRC typically processes claims within 15 working days. However, this can take longer if additional information is required or if the application contains errors.