New homeowners are being warned about cold calls from rogue tax repayment agents advising them to make speculative stamp duty land tax (SDLT) refund claims, which could leave them with large tax bills
The warning comes after a recent spate of stamp duty refund claims to HMRC failed to meet very specific criteria.
The agents have been known to call new property owners after finding them through Land Registry records and property search websites, promising money back on ‘unknowingly overpaid’ stamp duty.
In a recent example, a letter from a rogue agent suggested a homeowner may have overpaid £60,000 worth of stamp duty. The agent claimed the home could be designated as two properties, despite it clearly being one. This is not an isolated example – other cases include:
a claim that a bedroom could be a separate dwelling and in line for claiming ‘multiple dwellings relief’ because it had an en-suite and a built-in wardrobe which could be a kitchen if you added a microwave and a kettle;
an individual who claimed their house was not wholly residential because a paddock behind the garden was used occasionally to keep a neighbour’s horse. The agent advised that they were due lower stamp duty rates because the presence of the paddock made the transaction a mix of residential and non-residential property, which would incur a lower stamp duty payment; and
a new owner of a six-bedroom house claimed it was not a wholly residential property because a room above a detached garage was used as an office.
Recent analysis undertaken by HMRC suggests that up to a third of claims for multiple dwelling relief refunds were incorrect.
HMRC raises enquiries on these claims, but sometimes that is after the agent has taken their fee, leaving the homeowner to pick up the difference. Incorrect refund claims must be repaid with interest, with some potentially facing penalties as well.
HMRC collected £11.6bn in SDLT in 2019 to 2020 and this is set to rise as average UK house prices continue to soar after the pandemic. The average UK house price was £277,000 in February 2022, which is £27,000 higher than this time last year. This figure is £530,000 in London.
Nicole Newbury, HMRC director for wealthy and mid-sized business, said: ‘We are seeing obviously spurious refund claims that are never going to succeed; but will lead to an unnecessary bill for the customer.
‘So we are warning new homeowners not to get caught out by tax repayment agents promising easy money on a ‘no win, no fee’ basis. If it sounds too good to be true, it probably is. We want to help people get it right and avoid unnecessary tax bills, so treat promises of easy money with real caution.’
Anyone approached about a stamp duty refund claim should check with their original conveyancer, take independent professional advice and check HMRC’s guidance by searching ‘stamp duty land tax’ on gov.uk or contact the HMRC helpline on 0300 2003 510.
Over 1.2m homes have moved above the basic stamp duty threshold which will bring the Exchequer at least an extra £3bn a year
According to Zoopla’s latest house price index, 1.2m properties in the UK have moved above the initial £125,000 stamp duty threshold as house prices have risen around £29,000, or 13%, since March 2020 with an 8.3% rise in the last year alone.
As buyers pay 2% of stamp duty between £125,000 to £250,000, the Treasury looks set to see a minimum increase of at least £3bn if those 1.2m houses are sold at the entry rate of £125,001.
Since the average house price in the UK sits at a record level of £292,000, according to the Office for National Statistics (ONS) in January 2022, the Treasury will almost certainly see that extra £3bn in its coffers.
The latest HMRC stamp duty data revealed that in the first quarter of 2022, residential property transactions were 13% lower than they were in Q4 2021, and of the 244,200 residential homes bought, only 43,700 received first time buyer relief, while 27,300 were below the tax threshold altogether.
According to HMRC, 70% of residential transactions were liable for stamp duty land tax, compared to just 36% in Q1 2021 due to covid exemptions, with the average stamp duty bill for residential property in Q1 being £15,000, according to analysis from Coventry Building Society.
The data also showed that the 2% surcharge on the purchase of residential properties by non-residents up to the end of Q1 2022 raked in £111m for government coffers on just 10,400 transactions.
Last week’s tax receipts data from HMRC showed that the Treasury gained more than £14bn in stamp duty, including non-residential property in 2021-22 and comes despite the stamp duty holiday, which ended in September. Of that, £9.9bn of stamp duty receipts last year came from residential properties.
The overall receipts for stamp duty land tax, and annual tax on enveloped dwellings, for 2021-22 sat at £18.6bn, which is £6.1bn higher that the same period last year.
The Office for Budget Responsibility (OBR) predicts that stamp land tax duty alone will net the Treasury £17.1bn in the year to March 2023, a figure that is set to surge even higher to £20.8bn by 2027.
Tom Bill, head of UK residential research, Knight Frank, said: ‘Stamp duty has always been a pretty imperfect tax and can have a distorting effect on the market.
‘Reforming it could be problematic for the government, which may not have much bandwidth to do it before the next election.
‘With the social care crisis, however, you could see the rationale for offering stamp duty relief to people who want to downsize rather than wholesale changes, because having to pay that large bill can deter people from moving.’
There has been a lot of attention on the levels of stamp duty collected by the Treasury over the last two years due to rapidly rising prices however, Karen Noye, a mortgage expert at wealth management company Quilter said that rising house prices could possibly be a ‘thing of the past’.
Noye said: ‘Across the whole market, there has been a fall in transactions in the last three quarters and total SDLT receipts in Q1 2022 were 19% lower than in Q4 2021.
‘The heat is finally coming out of the UK property market, and this may have an impact on house prices. With interest rates likely to go up and lots of other factors squeezing people’s finances a gradual drop in house prices is highly likely’.
The government has announced that residential property transactions rose 15.6% in August following the introduction of a stamp duty holiday.
The government has announced:
- a rise in sales supports nearly three quarters of a million jobs in the sector – with new homeowners also spending extra cash on decorating, furniture and appliances
- a 30% boost in output in July for the construction sector.
New figures show that house sales rose 15.6% in August following the introduction of the stamp duty holiday, helping to protect nearly three quarters of a million jobs in the housing sector and wider supply chain.
The increase follows a 14.5% rise in July. Residential property transactions in August rose a further 15.6% as more people decided to buy a new home or move house. The increase in transactions came after the Chancellor announced a stamp duty holiday at the start of July that will last until March 2021.
The move has helped to protect nearly 750,000 jobs, benefiting businesses across the housing supply chain and beyond, with the Bank of England estimating that households who move home are much more likely to purchase a range of durable goods, such as furniture, carpets or major appliances.
It is expected that, among others, housebuilders, estate agents, tradespeople, DIY stores, removal and cleaning firms could all benefit from the increased activity.
Chancellor Rishi Sunak said:
‘Every home sold means more jobs protected – helping us to deliver on our Plan for Jobs.
‘But this isn’t just about the housing market. Owners doing up their homes to sell and buyers reinvesting stamp duty savings to make their new house feel like a home are also firing up local businesses, supporting, creating and protecting jobs across the country.’
As part of its Plan for Jobs, the government introduced a temporary stamp duty holiday for residential properties worth up to £500,000, effective from 8 July 2020 until 31 March 2021. The holiday means nine out of ten people getting on or moving up the property ladder will pay no SDLT at all. This measure delivers an average saving of £4,500 in SDLT.
Internet link: gov.uk news
Chancellor Rishi Sunak announced a temporary cut in the rate of Stamp Duty Land Tax (SDLT) in order to boost confidence in the flagging housing market in his Summer Economic Update.
Property transactions fell by 50% in May this year and house prices have fallen for the first time in eight years. In response, the government will temporarily increase the nil-rate band of residential SDLT in England and Northern Ireland from £125,000 to £500,000. This will apply to purchases from 8 July 2020 until 31 March 2021.
Additionally, the Chancellor announced a £2 billion Green Homes Grant, providing at least £2 for every £1 homeowners and landlords spend to make their homes more energy efficient, up to £5,000 per household. The scheme aims to upgrade over 600,000 homes across England, helping to reduce energy bills and support the green economy.
Eric Leenders, Managing Director of Personal Finance at UK Finance, said:
‘The Chancellor’s announcement on stamp duty should give a welcome boost to the housing market and in turn have positive knock-on effects for the wider economy.
‘This measure designed to re-boot the housing market builds on the wide package of support put in place by mortgage lenders, working with the regulator and HM Treasury, to help customers through these tough times.
‘The industry has a clear plan to help homeowners whatever their financial situation and is committed to providing ongoing support to those customers who need it.’