Due to incorrect calculations by solicitors and conveyancers, as well as the HMRC Stamp Duty calculator, it turns out that at least 25% of people are due stamp duty relief, which means you could be owed thousands.
What is Stamp Duty Land Tax?
Stamp duty is a form of tax used by the government usually when assets or property are transferred, in this case, we will only be looking at Stamp Duty Land Tax (SDLT) which to relates to the purchasing of properties or land. The name comes from the fact that the legal documents used to have to be physically stamped when approved, however, this is not really the case anymore as it is all done digitally.
In the most basic terms you will pay stamp duty on the purchase of property over £125,000 unless you’re a first-time buyer then you are exempt up to £300,000. However, there are a lot of moving parts to this machine and the amount of tax you pay is firstly affected by the value of what you’re purchasing and other things such as if it’s a second property or an annexe is located on the land too. If you’d liked to see more about the breakdown and brackets that HMRC have set there are tables in our blog post as well as more information.
Brief Explanation of the Price Brackets and How SDLT Is Calculated
Example: You buy a property for £400,000 and it’s your main residence, you don’t pay the Stamp Duty on the first £250,000 (0%) and on the remaining £150,000 you’d pay 5%, which would be (£5,000) so in total you would pay £5,000 in stamp duty.
Am I eligible for Stamp Duty Relief?
The reality of Stamp Duty is that it’s a tax that you are required to pay, it usually takes a tax specialist to make sure everything is calculated correctly especially if you own multiple properties (residential and non-residential) or land, in special circumstances you can obtain tax stamp duty relief.
There is a list of things that could have resulted in overpaying stamp duty, if any of the below relate to you then you may be entitled to relief.
The purchase price was more than £1,000,000.
Property contains woodlands
Outbuildings
Annexes
Paddock
Equestrian land / Stables
Farm
Woodland
Studio
Agricultural land
Outbuildings
Communal Gardens
Conservation areas
More than 3 acres of land
Copse (small woodland area)
Lake
Barn
Sub-station
Barn
Wayleave
Historic buildings or ruins
So if you have purchased a property and it contains anything that is mentioned above then you may have had your tax miscalculated as these factors aren’t taken into account on HMRC’s SDLT calculator, as it is only an estimation not an exact calculation so it is likely you could be due stamp duty relief. For example, you may qualify for what is known as ‘mixed use’ SDLT rates for example if you live above a shop or restaurant as there is more than one use for the property. There are also other exemptions that don’t come under and can apply to SDLT as they don’t relate to ‘mixed use, these are:
No money or other payment changes hands for a property or land transfer.
A property is left to you in a will.
Property is transferred because of divorce or dissolution of a civil partnership.
You buy a freehold property for less than £40,000.
You buy a new or assigned lease of less than 7 years, as long as the amount you pay is less than the residential threshold (£125,000) or non-residential threshold (£150,000) of Stamp Duty Land Tax.
There is another form of relief known as ‘MDR’ – Multiple Dwelling Relief, this allows you to pay stamp duty relief on the average cost of your properties rather than paying stamp duty on each individual property, this always works out a lot cheaper. For example you purchase 5 Properties at £1,000,000 in total, the average price would be £200,000 for each property. The first £125,000 has a 0% tax on it, you’d only pay 2% tax on the remaining £75,000, meaning the SDLT owed would be £1,500 on each property, totalling £7,500.
The most obvious giveaway that you may be eligible for stamp duty relief is if your property has an annexe or separate dwellings on the grounds. If your grounds contain extensive outbuildings, stables etc. or you bought a flat above a shop meaning your property has both residential and commercial elements then it means it is eligible for tax relief.
Companies that transfer property between each other are eligible for group Stamp Duty relief, the buyer and the seller both need to be a registered company for them to be eligible. Charities can also receive Stamp Duty relief when they buy land or property for charitable purchases, although HMRC can withdraw relief if the charity stops using the property or stops being a charity within 3 years of the purchase.
How Do I Claim Stamp Duty Relief?
If you’re about to purchase a property or have purchased one in the last 4 years, then you could be eligible to claim a tax relief, if you bought it more than 4 years ago HMRC won’t offer relief but there are other avenues you can look at taking. Using solicitors and conveyancers are the norm when buying or selling a property they are not tax experts so this is why at least 25% of people have overpaid and due relief.
Calculating what you’re actually owed and getting this back from HMRC are two completely different matters, you will need an expert like Stamp Duty Returns to examine your original purchase, look at the details of your property and confirm if any errors were made at the time of purchase. The expert will then need to write to HMRC with a detailed explanation of what was done wrong, why they think a refund is due, and a completed amended return.
Get in touch with us today, by calling 0330 380 0941 or contacting us via our website. Our expert team can help calculate the amount of tax you’re due back from HMRC.