Stamp duty refund - how it works and how to claim

Stamp duty land tax (SDLT) is part of the property buying process. When some buyers pay stamp duty, they may overpay or qualify for refund in retrospect.

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.

In this blog we’ll look at some of the reasons why a stamp duty refund might be granted, what the procedure is for making a claim, and how long it might take 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 values above 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. However, there are SDLT reliefs and exemptions which you should also be aware of.

Stamp duty rates

Rates for a single property

You pay stamp duty at these rates if, after buying the property, it is the only residential property you own. You usually pay 3% on top of these rates if you own another residential property.

Stamp duty surcharge

As well as the standard stamp duty payment, a surcharge will be applied if you:

• Are purchasing buy-to-let property as a private landlord or through a limited company
• Are buying a second home for £40k or more

For example, if you purchased a property as per above for £500,000, you would pay:

• On the first £125,000 (no stamp duty but 3% surcharge) = £3,750
• Between £125,000 to £250,000 (2% stamp duty and 3% surcharge) = £6,250
• £250,000 to £500,000 (5% stamp duty and 3% surcharge on the final £250,000) = £20,000

Final stamp duty bill £30,000

The stamp duty rates for second homes are:

What is the SDLT refund?

Second homes usually come with an additional rate of stamp duty to pay. Anyone purchasing an ’additional’ residential property will be charged a surcharge on each of the threshold bands. However, if you sell your first property shortly after buying your second, then you may be able to claim a refund on that tax you paid.

The rules are complex and in recent years many companies have encouraged people to make refund claims that should not have been made through rules being misinterpreted. It is therefore imperative that you seek advice from qualified accountants such as dns accountants, before you proceed to make a claim.

If you’re replacing your main residence

You will not pay the extra 3% SDLT if the property you’re buying is replacing your main residence and that has already been sold.

If you have not sold your main residence on the day you complete, your new purchase you’ll have to pay higher rates. This is because you own 2 properties. You can apply for a refund if you sell your previous main home within 36 months.

If it takes longer than 36 months to sell your previous main home

You may still be able to get a refund of the extra 3% SDLT if all of the following apply:

• you purchased your new home on or after 1 January 2017
• exceptional circumstances stopped you from selling your old home, for example a public authority blocking the sale
• you have now sold your old home

To claim a refund, write to HMRC and explain why the sale took longer than 36 months.

Include:

• your details
• details of the main buyer - if different to your own
• details of the exceptional circumstances that prevented the sale of your property
• details of the property where higher rate SDLT was paid - including the address, date of purchase and SDLT unique transaction reference number
• details of the previous main residence - including the address, date of sale and SDLT unique transaction reference number
• the amount of higher rate SDLT paid
• the amount of tax you’re asking for a repayment of
• a bank account and sort code for the person receiving the payment

SDLT 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 refund.

SDLT refunds for uninhabitable buildings

If a property is deemed uninhabitable, then this may impact the stamp duty you pay. However, over recent years there have been many companies claiming they can get Stamp Duty refunds for uninhabitable properties, but this is often not the case as the property doesn’t fulfil uninhabitable criteria.

Criteria for a property to be deemed uninhabitable

A house that is simply in a state of disrepair is not deemed uninhabitable. Uninhabitable is defined as being a property that is unfit for human occupation.

The Health and Safety Executive outlines a number of factors where a property could be considered uninhabitable. These include things like:

• Lack of basic facilities like a functioning kitchen or bathroom
• Severe structural issues like collapsed floors or significant roof damage
• Major health hazards such as the presence of asbestos, raw sewage or toxic mould
• Absence of a reliable source of heat

Unhabitable buildings are those that pose a serious risk to the health and safety of potential occupants. If you do make such a property purchase, then you may well be eligible to make a stamp duty refund claim. To do this, the property must be in such a state at the time of purchase. If the conditions causing it to be uninhabitable occur after you’ve bought the property, you’re unlikely to receive a stamp duty refund.

SDLT 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 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 transactions (mix of dwellings and non-residential property) where SDLT MDR (Multiple Dwellings Relief) is claimed.

A taxpayer can claim multiple dwellings relief (MDR) when more than one dwelling is acquired in a single transaction or a mixed-used purchase consisting of more than one dwelling.

How does claiming back stamp duty work?

Apply for a repayment

To apply for a repayment, you can:

• use the online form
• fill in the form on-screen, print it off and post it to HMRC

To use the online form, you need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you use the service.

How long does it take to get a Stamp Duty Refund paid?

The stamp duty refund is usually processed up to 15 days after you submit your online form to HMRC.

What do I need to reclaim stamp duty refund?

To fill out the form required by HMRC to claim a refund you’ll need:

• your details
• the main buyer’s details if they’re different to your own
• details of the property that attracted the higher rates of SDLT, including the effective date of purchase and the SDLT unique transaction reference number
• details of the previous main residence you’ve sold, including the effective date of sale, the address of the property and the name of the buyer
• the amount of tax paid on the property that attracted the higher rates of SDLT
• the amount of tax you’re asking for a repayment of
• the bank account and sort code details of the person to receive the payment, where possible we will pay any refund electronically

Need more help with your stamp duty refund?

Stamp Duty Land Tax can be a complex area to navigate and HMRC have been cracking down on bogus claims in the past few years, so it’s worth seeking professional advice from accountants such as dns and not using companies that purely work on obtaining a stamp duty refund.

Our highly experienced SDLT tax advisors and tax team provide comprehensive assistance for all your tax planning requirements, including SDLT, personal tax, corporate tax, and inheritance tax. Here are some key areas where we can help:

• Minimising SDLT for property developers and builders.
• SDLT for ’mixed use’ properties.
• Multiple Dwellings Relief (MDR).
• Claiming back additional 3% SDLT surcharge paid to HMRC.
• Consultation services for HMRC enquiries related to SDLT.
• SDLT advice for non-residents and companies.

See how dns can help you today.

Looking to manage your stamp duty land tax (SDLT) or need expert advice? Our team of knowledgeable SDLT experts can assist you with comprehensive tax planning, including making a stamp duty refund claim.

Call us today on 03300 886 686 or email on enquiry@dnsaccountants.co.uk

About the author

Owais Bombaywala
Working closely with individuals and businesses to help grow their business requires a significant amount of experience and industry knowledge. Owais is BA (Hons) Accounting and Finance and Member of ACCA. Besides being a compliance champion, he specialises in Property tax planning. With over 7 years of experience in Accountancy and Tax world, our clients count on us to give them timely and up to date advise to help them make the right move. Owais works closely with some of the DNS’s most valued clients to give them the confidence they need to focus on their business. He is known for his calm nature and proactive approach. At DNS, we proud to be a modern and client centric firm. Our advise doesn’t just look at what’s best for your business moreover our aim is to help you achieve your personal goals. Away from work, he resolve family disputes and provide care and support to elderly people. He is a founding member of Human welfare organisation Hounslow.