Stamp duty land tax (SDLT) is part of the property buying process. When some buyers pay stamp duty, they may overpay or qualify for an exemption in retrospect, which means they may be eligible for a stamp duty refund.
There is an additional 3% surcharge on top of existing SDLT rates for people with more than one property for example, buy to let property and second homes or a holiday home (excluding caravans, mobile homes or houseboats) and again this may give rise to a refund if mistakes have been made.
This article looks at circumstances where someone has had to pay stamp duty and a stamp duty refund might be granted, the procedure is for making a claim, and how to receive a refund from HMRC.
What is stamp duty land tax? (SDLT)
Stamp duty land tax (SDLT) refers to a tax levied by the government on the acquisition of land and properties with a value greater than a certain threshold. The tax is calculated based on the property purchase price.
This tax must be paid to HMRC within 14 days of the completion of the purchase or transfer of the property in England or Northern Ireland.
The rates payable are generally determined by using the land or property, which may be residential, non-residential, or mixed purposes.
There are SDLT reliefs and exemptions which you should also be aware of. Find out more about Stamp duty land tax reliefs and exemptions here.
What is the SDLT refund?
Buyers can claim a stamp duty refund if they sell their main residence within three years of completing on a new home.
The stamp duty rate ranges from 2% to 12% of the purchase price, depending upon the value of the property bought, the purchase date and whether you are a multiple home owner. Anyone purchasing an ’additional’ residential property will be charged a 3% surcharge on each of the threshold bands.
The rules are complex and many people have found that they can claim SDLT refunds from HMRC when rules have been misinterpreted or stamp duty has been miscalculated.
Can I reclaim Stamp Duty?
SDLT is paid depending on the property price. You can reclaim overpaid SDLT after the purchase of your property, but there are time limits, and only specific circumstances where you may be eligible.
When can I apply for SDLT refund?
The SDLT surcharge paid on a property can be claimed for refund where:
- You use/intend to use the property bought as your only or main residence,
- You sell a property within three years beginning with the day after the effective date of transaction of purchase of the new property and.
- The property which was used as your only or main residence at any time during the period of three years ending with the effective date of the transaction of purchase of the new property.
All the above criteria for and SDLT refund must be met.
Am I entitled to make an SDLT refund claim?
There are clear guidelines from HMRC around Stamp duty land tax refunds but sometimes, unless you understand tax law, things aren’t always that straightforward.
Here’s a quick summary why buyers may find they are eligible to claim a SDLT refund from HMRC but speak to one of our tax advisors to find out more details:
SDLT refund on miscalculated properties
If you could have paid more stamp duty than you should have due to an inaccuracy with HMRC’s online stamp duty calculator. The calculator wasn’t always accurate and many solicitors were using it for final calculations. So it’s worth double checking now if the SDLT you paid was indeed correct.
Second home stamp duty refund
You will be eligible for a stamp duty refund on your second home surcharge if you sell your main residence within three years of paying the additional 3%.
Stamp duty land tax refund for properties with an annexe
If you paid a stamp duty surcharge on a property with an annexe, granny flat, or another smaller building on the grounds of your main home, you might be able to make a SDLT refund claim.
Properties with a self-contained annexe on their grounds are treated as a single home, rather than two different properties, so long as the main building is worth at least two-thirds of the property’s overall value.
If your property falls into this category you may be eligible for a sizeable refund. Contact us if your property falls into this category.
STDL refund on uninhabitable buildings
There may well be an SDLT exemption for uninhabitable buildings or properties. However, this is a grey area as what HMRC believe is uninhabitable and what the average person considers uninhabitable can be very different.
Dereliction is the word used in the HMRC guidance, and there is a big difference between a derelict property and a dwelling that is essentially habitable but in need of modernisation, renovation or repair. Seek guidance on this matter.
Stamp duty land tax refund claim on outbuildings
Outbuildings such as barns on the grounds of your property could also reduce your SDLT liability. If this has resulted in an overpayment, then you could be looking at a refund.
SDLT refund claim on land and woodland
If your property has more than 1.3 acres of land attached to it, then mixed use rules could potentially save money in SDLT.
Forestry land is often sold as part of a residential property in the same transaction. This can provide another strong argument for “mixed use” and potential savings on tax due.
SDLT refund claim on mixed use property
HMRC corrected their guidance on SDLT for mixed-use dwellings, stating that the additional 3% SDLT surcharge would not apply to the purchase of mixed-use transaction (mix of dwellings and non-residential property) where multiple dwellings relief is claimed.
Multiple dwellings relief could be claimed by a taxpayer when more than one dwelling is acquired in a single transaction or a mixed-used purchase consisting of more than one dwelling. HMRC has backed track on their long standing viewpoint for such transactions.
This change could allow the affected purchasers to claim back their overpaid SDLT from HMRC on transactions related to mixed-use, which involved multiple dwellings.
How to apply for a SDLT refund
You can apply using a HMRC online service or fill in the form on-screen, print it off and post it to HMRC. However, its worth seeking advice from a professional advisor who can look at your sdlt returns and give you specific advice before you use the online service. dns can offer you tax specialist advice in this area.
Informatin needed to make an SDLT return refund claim
The information you need to make a cliam includes:
- Your name and address.
Details of the property that attracted the higher rates of SDLT, including:
- date of purchase.
- SDLT unique transaction reference number.
- Details of the home you’ve sold, including
- date of sale
- address of the property
- name of the buyer
- Amount of tax paid on the property that attracted the higher rates of stamp duty.
- How much tax you’re asking for a repayment of.
- Bank account and sort code details of the person to receive the payment.
How long do I have to make a claim?
The refund can be applied for by amending filed stamp duty return at any time within the period of 12 months beginning with the effective date of the subsequent transaction (transaction involving sale of previous main residence) or, if later, the filing date of the return for newly purchased property. Miss these dates and your refund claim will be invalid.
What is the stamp duty refund procedure?
The refund procedure is fairly straightforward and can be done either online or by post. It’s worth speaking to a tax advisor to get clear advice around your stamp duty payment and whether youll be eligible before making a claim.
How long does it take to process a stamp duty refund claim?
The refund is normally processed within 15 daysunless HMRC requires additional information.
If your stamp duty claim is not settled within this time, you could be entitled to any interest due on the refund, but you will not be able to file for compensation.
Need more help with your stamp duty refund?
The SDLT rules can be complex, so it’s worth seeking expert guidance to find out if you’re eligible for a refund.
If you need assistance with filing a claim for SDLT refund or you think there are grounds for claiming the stamp duty refund, then please contact us.
Call us on 03300 886 686 or email on email@example.com.
Any questions? Schedule a call with one of our experts.