SDLT Explained

Stamp Duty Land Tax
Complexities and Refunds Explained

Since 1 April 2016, higher rates of stamp duty land tax (SDLT) have been charged on the purchase of second and subsequent residential properties meaning if you own two properties on the day of completion of the purchase of your second property but still legally own your first property, you are obliged to pay the higher rate of SDLT. This is just one example where Stamp Duty gets complicated, below are just a sample of some of the reasons why calculated Stamp Duty is not straightforward. If any of these factors are involved the assistance of a tax specialist should be sought.

Why You Might Be Due A Refund

SDLT is a complicated tax that has been subject to numerous changes over the years. Its legislation is full of exemptions, reliefs and qualifying criteria not all of which are obvious.

There are even three calculators available on HMRC’s own website and they are, by their own, admission, purely intended as a guide. No guidance is provided on which calculator to use for each transaction so purchase variables can produce differing results from the norm, including aspects which lead to exemptions and reliefs. As such SDLT is often calculated purely on the basis of a translation being residential or commercial.

Because of the many complex rules and reliefs conveyancers often err on the side of caution when calculating SDLT and their clients end up over-paying.

It is wise to seek the advice of a tax expert who is able to accurately calculate SDLT and ensure you pay the correct amount.

Mistakes Are Costly

HMRC is unforgiving when errors are made and can impose fines and interest on anyone found under-paying. HMRC does not advise on over-payments and the right questions must be asked in order to gain a refund.

SDLT Calculations With Upmost Accuracy

Numerous data points about the land or property is input into our software; which tracks all exemptions and reliefs. This allows us to accurately assess the transaction. Our team are experts in SDLT and know exactly what to look for to ensure it is calculated on anyone found under-paying. HMRC does not advise on over-payments and the right questions must be asked in order to gain a refund.

Why Your SDLT Might Be Complicated

  • There are many reasons why your SDLT obligation should be reviewed carefully.
  • What type of property is being purchase? Residential, Commercial, Mixed Use.
  • How much is chargeable? Some interests are exempt.
  • Who is buying? Company, Partnership, Individual.
  • Is additional land or property owned?
  • How is the purchase being funded?

Risk Areas - Residential

  • Land over half a hectare (1.24 acres).
  • Any commercial or non-residential buildings on the land.
  • Annexes, flats or cottages in the grounds.
  • Any rights over or interest in land that does not benefit the dwelling.
  • Any element that indicates non-residential use.
  • Any acquisition that has been made subject to a reservation/ exclusivity agreement or option payment.

Risk Areas - Commercial/Development

  • Office buildings bought using “permitted development rights” for conversion for residential/mixed use.
  • Commercial property acquired together with residential units.
  • Where land has been bought with the benefit of a planning permission allowing the development and construction of residential housing or units.

Case Studies

1Case Study One
Matt lives in a flat in Leeds. He also owns three other properties in the Huddersfield area which are let out. He sells the flat in Leeds and buys a three-bedroom house for £300,000. The sale of the flat and the purchase of the new house complete on the same day. Matt moves into the house as his new home. The fact that Matt owned additional residential properties, the three houses that he lets out is not relevant in calculating the SDLT payable on the purchase because Matt is replacing his main residence.The SDLT that is payable on the purchase price of £300,000 is £5,000 and not £14,000.
2Case Study Two
Edward has a house in Cambridge and also has two flats which he rents out. Edward’s role at work changes and he needs to move to London. He eventually sells the house in Cambridge but decides to rent in London until he can find a suitable new house. Fourteen months later, he completes on a house in Oxshott for £1 million. Although Edward had two additional residential properties at the time of the purchase of the house in Oxshott, this is a replacement for his former main residence in Cambridge and was bought within three years of the sale of that property. Therefore, SDLT is payable on the Oxshott property at the normal residential rates and the 3% supplement is not payable. Unfortunately Edward was badly advised on the purchase of the Oshott property and he actually paid £70,000 stamp duty which included the supplementary charge. In this situation Edward is entitled to a refund of £30,000.
3Case Study 3
Rea and Tom were buying a new home but were struggling to sell their existing home and as they were keen to be in their new home for the start of the new school year, Rea is a teacher, they used bridging finance to buy the new home before they completed the sale of their old one. The purchase of their new home completed in June 2017, and the sale of the old home completed in September 2017. They paid £450,000 for their new home. At the time of the purchase of the new home, Rea and Tom have an additional residential property,(their unsold old home) so they must pay SDLT at the rates for additional residences. The SDLT paid was £26,000 which includes a 3% supplement of £13,500 (£450,000 @ 3%). Once the sale of their old main residence completed in September 2017, Rea and Tom can reclaim the supplementary charge of £13,500, as the old residence was sold within the three-year window

Reclaiming the supplement

It is important that the claim deadlines are not missed. A reclaim for Stamp Duty can only be submitted within four years of the property purchase. We can help with your Stamp Duty refund application and ensure that the right paperwork is submitted. Some key concerns which red light potential for incorrect calculations are:

  • Land over half a hectare (1.24 acres) and/or agricultural land with paddocks, stables etc.
  • Commercial or non-residential buildings on the land.
  • Offices bought using 'permitted developments rights'.
  • Land with planning permission for residential development and construction.
  • Annexes, flats, cottages, granny flats in the grounds.