The recent stamp duty (SDLT) announcement is welcome news for the property sector, with the SDLT threshold being raised to £500,000, meaning that 9/10 of all main home buyers will have no SDLT to pay until the end of March 2021.
It’s left those who have bought a property within the last couple of years, feeling as though they’ve ‘missed out’.
But, according to tax barrister Patrick Cannon, that isn’t necessarily the case, because there are instances where certain properties may not be required to pay stamp duty – and it’s possible to reclaim if you think you’ve overpaid.
We spoke to Patrick to explain…
Buying and renovating a property is, clearly, a multifaceted transaction. With solicitors to chase, surveyors to organise and mortgage lenders to manage – and that’s before the renovations begin – it is easy to overlook the area of stamp duty relief.
Homebuyers sometimes overpay stamp duty because their conveyancers either don’t have the information they need, or they wrongly decide that a relief cannot be claimed. Conveyancers, on the whole, take a conservative view.
The main types are:
Mixed-use properties
Those who buy a mixed-use property – i.e. both residential and non-residential – are eligible to pay lower rates of stamp duty, but the definition of what is a mixed-use property is currently a matter of debate with HMRC.
Typically, a mixed-use property is one where the building is divided into separate areas, with part used for residential accommodation and part adapted for business or commercial use (such as a house which is partly use as a shop or a dentist, for example).
The property must meet a ‘test’, whereby it is deemed used or suitable for use as a residential property at the date of sale.
It is wise to take professional advice when considering whether your property is mixed use or not.
Multiple dwellings relief
Multiple dwellings relief is worth considering for buyers who purchase a property containing more than one self-contained unit, such as one or more annexes within the house – or self-contained accommodation in outbuildings on the property.
It allows the stamp duty to be calculated by the average value of the property purchased multiplied by the number of properties, rather than the total price of all the dwellings.
This can lead to a significant reduction in the amount of SDLT charged on the purchase of two or more dwellings – either together or in linked transactions.
Again, it is a good idea to take professional advice when considering if the higher rate of 3% applies.
How can people find out if they’re eligible to reclaim?
Home buyers should check the details of a purchase and then consider whether a stamp duty relief applies. In most cases the refund claim must be made to HMRC within 12 months and 14 days of completing the purchase.
If stamp duty has been overpaid because a conveyancer failed to claim the relief, it is possible to amend the SDLT return and make a claim to lower rates of SDLT.
How to claim back stamp duty
HMRC’s SDLT calculator enables property owners to work out the rates of stamp duty. Individuals can then write to HMRC to claim for the amount that has been overpaid.
The refund rules are complicated but if the deadline for making a claim it missed, buyers could claim against their conveyancer.
How long does a stamp duty reclaim take?
Generally, a refund claim takes several weeks to be processed and repaid by HMRC. HMRC operates a “process now/check later” procedure which means that they will normally pay out the refund after some basic checks. They will then examine the claim in more detail within a nine-month period after the claim.
Where the refund claim looks questionable, HMRC will open an enquiry and require detailed information in support of it. If they then disagree that a refund was due, they will issue a closure notice requiring repayment.
It is important to note that, just because HMRC pays the refund initially, it does not mean that it will not be challenged later on. Some SDLT refund claims companies will charge a fee as a percentage of the amount refunded, but claimants should always ensure that this fee is conditional on HMRC not revoking the refund.