According to tax experts, tens of thousands of business owners who traded commercial real estate into their self pension program may be entitled to a stamp duty refund. Billions of dollars have been paid to HMRC incorrectly, and that can be claimed now.
An SSAS called the ‘small self-administered scheme’ is a trust-based scheme. The trust has a maximum of eleven members who generally pool their pension money to purchase commercial properties. The trust is formed by small business owners looking for properties to run their businesses. When an SSAS scheme is applied, they are exempted from many more requirements.
In July 2020, property tax experts had been researching the incorrect payment of Stamp Duty Land Tax (SDLT) on property transactions that were excluded from SDLT, particularly transactions of commercial properties into SSAS and SIPP pension systems. Property tax experts believe that the average incorrectly paid charge is £50,000.
The experts also stated that many small company owners may be eligible for a SDLT refund if they transfer a property into a pension system. The reimbursement might result in tens of thousands of pounds in tax refunds for these specialist pension savers. The amount of refund solely depends on the price of the property.
Who is eligible for a return?
Business owners who have transferred their commercial assets into self-invested personal pensions (Sipps) or small self-administered pension systems (SSAS) may be entitled to refunds. But, there are a few conditions for the eligibility of the refund. First of all, the property should be owned jointly by a couple, or by a company owner. Secondly, the members of the pension scheme should be members or relatives of the property owners.
As these rules are a little complicated, pension ministers and campaigners are advised to seek professional advice if they think they are eligible for the tax returns. The pension consultants—accountants, attorneys, and insurance firms—intend to advise their members on the matter.
According to a tax agency, the issue might have impacted between 3,000 to 5,000 pension holders every year since 2007, the year stamp duty was last revised. Till now, the total cases would be 45,000 to 75,000, resulting in a loss of about £50,000 to £80,000 in each case.
What does HMRC have to say on this?
Many tax adviser firms have already won several cases on behalf of clients. Leigh Philpot of Kingswood firm stated that they were shocked to learn when property tax expert announced that the payment of stamp duty by pension was not taxable. As the head of the wealth adviser department, they collaborated and have made several claims. He also said that other advisers from his group are also investigating the matter to rectify any cases of incorrect tax payments.
As many agencies filed claims, HMRC underlined that converting a property to a pension fund is subject to SDLT. And, a general approach to claims mentioning this loophole will not be entertained. Each claim will be examined, studied thoroughly, and judged on its own basis. If a case is considered valid, claims will be received. But, if the agencies receive claims that are erroneous, then the clients will be held responsible.
HMRC further added, “Due care should be taken with advertisements or posters claiming to be able to achieve an SDLT return since HMRC reserves the power to inspect claims and any false or unsupported claims can lead to individuals being subject to a penalty.”
HMRC has not completely said that pensioners will be exempted from tax payment and stamp duty while transferring properties to pension funds. Except in a few circumstances, most of them are eligible for stamp duty payment. So, while choosing an agent to file a claim for funds, your case should be examined thoroughly.
HMRC has a high success rate in contesting bogus claims brought about by repayment agencies and can and does verify claims even after the refund has been made. Refunded stamp duty can be claimed back by HMRC if the case turns out to be insignificant on examination.
In this statement, firms have reassured that extra care would be taken while forwarding claims. Blanket cases would be avoided in all circumstances, and each case would not be presented to HMRC without a thorough inspection first. Many agencies have also collaborated to work on these claims.
File your claim with HMRC
What should you do if you have a SIPP or SSAS pension and have recently put commercial property into it? To begin, determine if Stamp Duty was charged on the purchase—based on our data, the majority of these will have been. In such a case, contact an agency for further steps.
If the transaction is not older than four years, it is most likely the agency will file a claim on your behalf. This can be a lengthy process that requires thorough explanations of why the tax was incorrectly paid, identification of the legal regulations that apply to the misrepresentation, and submission of the appropriate updated return forms to receive the return.
As the numbers involved are significant, resulting in more than 10 billion pounds overpaid in taxes, action should be immediately taken. There is a pressing need to inform people about this and time is running short. Only if a claim is filed within four years can HMRC pay a refund of overpaid tax and interest. Otherwise, the claims need to be filed through agencies and firms and you will have to wait for them to take your case.
This issue has raised confusion amongst SSAS and SSIP pension holders. On asking, property tax expert stated that they think the mistake occurred as the rules and regulations regarding stamp duty are complex. The rules are not clearly explained to clients or advisers. To avoid these mistakes in the future, HMRC should clarify once again, the rules when stamp duty must be paid while moving properties into pension schemes.