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and how much you you're Due back from HMRC
Do you need help with claiming tax refunds after purchasing property with land, woodland, annexes or outbuildings? If so, you’re not alone.
Stamp Duty Land Tax (SDLT) is an extremely complex area of taxation. It has seen more changes since being introduced in 2003 than any other comparable tax and is now a minefield of exemptions, exceptions, special circumstances and reliefs.
Conveyancers are often not familiar with the wide range of different circumstances that can affect this tax, including the many types of properties and buyers and the residential or commercial classifications that may apply. It doesn’t help that there are often conflicting messages from regulators, and the result is that many people end up paying too much SDLT on properties that include land and woodland, annexes or outbuildings.
Thomtax are experts in this ever-changing area. Our team has a wealth of specialist experience and can help to ensure that you pay no more than you should and are able to claim refunds that you are owed.
If you are about to complete the purchase of a property, or have done so in the last 12 months, then you could be liable for a refund on your SDLT.
If your property has features including land, outbuildings, woodland or separate annexes, then you should contact us for advice and one of our experts will talk you through the options.
There are a number of reasons why homeowners are overpaying their SDLT, and you might have seen reports in the media recently saying that such overpayments are becoming more frequent. Despite these reports, there seems to be a lack of understanding of the tax rules in this important area on the parts of both buyers and the property professionals who are there to help them.
HMRC is often accused of providing inadequate support in this area. Tax calculators are often poorly implemented. Training is sometimes inadequate or not provided in a timely enough fashion to deal with the frequent updates.
At the end of the day, SDLT is a tax and it often requires experienced tax experts such as Thomtax to untangle the many different threads. Properly assessing and calculating features such as land, woodland, separate annexes and outbuildings can have a significant impact on any SDLT due and could result in a refund if you have overpaid.
Making an accurate calculation can also ensure that you do not end up making an overpayment in the first place that you then have to claim back.
Some of the main reasons why homebuyers overpay are:
SDLT has been subject to frequent changes since its inception. Many exceptions, exemptions and reliefs apply, but these are not always properly understood by property professionals such as conveyers.
HMRC has an SDLT calculator. Buyers and professionals frequently use this calculator as their main source of information when it comes to calculating SDLT, but it is essentially very basic and does not deal with the many nuances and variations in the tax system. HMRC itself says that its calculator should only be used as a guide.
The overpayments have arisen because of failings in an online calculator provided on the HMRC website, according to reports.
The software apparently misses out a number of potential discounts. If a home has a separate annex, such as a “granny annex”, or has farmland attached to it, then it could be eligible for a discount.
Because these potential discounts are not being taken into account, it is being claimed that up to one in six calculations could be wrong. It is claimed that the calculator is not only being used by homebuyers but also by professionals such as lawyers who often rely on it to calculate tax due.
A rate of 12% stamp duty is paid on homes, while mixed-use properties are taxed at 5%, the Times reports.
It added that revenues from stamp duty had virtually doubled in the space of five years, hitting around £13bn last year.
A spokesperson from property tax specialists Thomtax said that HMRC was currently dealing with up to 900 cases every month.
They added that the tax calculator was up to the job and said that due to the volume of disputed cases, HMRC’s turnaround in responding to queries was often very long, taking up to 28 days.
HMRC said that its free online calculator should be used as a “guide only”. It added that “all reliefs are clearly signposted on stamp duty land tax returns”.
Solicitors, conveyancers and agents all have their parts to play in property sales, but they are not generally tax experts and may make incorrect assumptions that lead to too much SDLT being paid.
If your home cost in excess of £500,000 and the grounds contain land, woodland, outbuildings or annexes, then it is possible that you have paid too much SDLT, which would make you liable for a refund.
Outbuildings such as barns on the grounds of your property could also significantly reduce your SDLT liability. If this has resulted in an overpayment, then you could be looking at a refund.
If the property has more than 1.3 acres of land attached to it, then “mixed use” rules could potentially save you thousands in SDLT.
Forestry land is often parcelled up alongside a residential property in the same transaction. This can provide another strong argument for “mixed use” and potential savings on tax due.
British homebuyers could be owed a huge £2bn by the taxman for overpaid stamp duty because an online calculator got its sums wrong.
The HMRC online tool is supposed to calculate the amount of stamp duty owed after buying a property. It does not take certain discounts into account, however, which could potentially be worth thousands.
If the property has a “granny annexe”, farmland or a commercial building attached to it, for example, then discounts should apply. One advice company based in Leicestershire said that it had seen a 400% surge in claims for repayments, while HMRC is dealing with a whopping 900 cases per month. It said that lawyers used the HMRC tool to make calculations on the stamp duty due for their clients.
The firm said that one in six homebuyers may have paid the wrong amount of stamp duty due to this issue and that this could amount to £2bn. HMRC denied this, however, and said that most people paid the correct amount. It said that the online calculator should only be used as a guide, but solicitors countered by saying that the taxman treated them like accountants and that the calculations required expertise that they did not have. The main problem is that the calculator does not have an option to class a property as “mixed use”.
Stamp duty on mixed-use properties is at 5%, compared to 12% for homes worth in excess of £1.5m. The advice firm gave some examples of homebuyers who had been massively overcharged. It said that one couple bought a home that came with a field for £1m. They paid £43,750 in stamp duty, but this should actually have been £39,500. This is because the field had been rented by a farmer and so should have qualified for a mixed-use discount.
Another woman was reportedly stung when she bought a block of multiple flats above a café for £500,000. She ended up paying £14,500 in stamp duty, but this should have been £8,400. In this case, she should have received relief on the tax because she had bought multiple dwellings. Yet another homebuyer was charged £30,000 for stamp duty on a £500,000 house. It should actually have been £10,000 – this time because the property had an annexe.
Sarah Dwight, a solicitor on the Law Society’s Conveyancing and Land Law Committee, said: “A lot of the calculators are not up to it. “We write to the HMRC for guidance but we’re finding a long turnaround time, often 28 days, and that doesn’t help the chain if someone is moving house.” HMRC countered by saying: “All reliefs are clearly signposted on stamp duty land tax returns. Our ‘ready reckoner’ provides a guide only.”
Any homebuyers who think that they might have overpaid their stamp duty can claim a refund via the government’s website, www.gov.uk.
After reading this article you should have a good idea if your circumstances are right for making a claim. If you need any more infomation then you could contact one of our team.
As a rule you’re able to claim a refund on the second home surcharge if you sell either residence within 3 year of paying the surcharge.
The Property type which has had the most amount of claims is properties with an annex or Granny flat. Many home owners are not aware that their solicitor may of calculated their SDLT incorrectly during the change of ownership. If you have a annex and purchase the home after 2018 you could be due a sizeable refund. For more information visit ourAnnexes page
For the more straight forward cases HM Revenue & Customs are processing them in 3-6 weeks. For the more complex you could be looking at up to 6 months
We can normally tell you if you have a reason to submit a claim over the phone.
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