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Here is a guide to understanding residential SDLT and reclaiming overpaid tax amounts.
The Stamp Duty Land Tax is a tax levied by the UK government on property or land purchased which has a value over a certain limit. You should pay the tax within 14 days of purchasing or transferring the property to the HMRC. The tax amount is calculated based on the type of land or property purchased – residential, non-residential and mixed-use property.
Nearly 20% of all SDLT returns are filed incorrectly, due to which millions of pounds are overpaid to the HMRC. Most of the overpaid taxes could be due to miscalculation of the tax due, missed reliefs, unforeseen circumstances of the buyer, property value being miscalculated, and exceptions being missed by solicitors.
Many property buyers tend to overpay their SDLT amount primarily for two reasons: they don’t know whether property relief applies or believe that relief cannot be claimed for the said property.
There are many residential stamp duty tax reliefs, but the major ones are:
The stamp duty payable on private properties is generally higher, and yet most conveyancers don’t understand these complex rules completely. In most cases, the 3% rates are remitted even when it is not a requirement. In order to avoid overpaying the tax, it is essential to cross-check the final amount with an experienced solicitor. This way, you can avoid the excess charges and also reclaim overpaid tax amounts.
Mixed-use properties, such as those bought for residential and commercial purposes, usually attract lesser stamp duty amounts. However, the exact definition of mixed-use property is still a matter of discussion at the higher levels. Since the term 'mixed-use' lacks a clear definition, many cases are being heard by the Tax Tribunal for clarity. However, if you think that your property can be considered a mixed-use one, you can claim SDLT repayment from the HMRC.
Multiple-dwelling purchasers can also take advantage of the tax relief available for them. Multiple-dwelling means a property with more than one unit (even with an extension inside the property) or an extra independent house constructed outside the primary building but in the same property.
To accurately know whether you are eligible for stamp duty relief or reclaim, you should thoroughly check the purchase details of the property. You must submit a claim for relief to the HMRC within a year of the purchase. If the tax was overpaid because the conveyancer didn’t claim relief, a plea to amend the SDLT return could be made. Further, you can also reclaim the excess Stamp Duty Tax.
If you are going by the tax calculators present on the HMRC website, please note that these calculators are only meant to provide you with an approximate value. The tax amount that the HMRC calculators calculate doesn’t take into account many factors that impact the tax due. So, it is advisable to consider the calculator as merely a guide and not a credible tool for SDLT calculation.
We have provided you with a broad overview of the residential Stamp Duty Land Tax calculation and ways to reclaim overpaid tax amounts. The tax laws are complex, and any layperson will find these laws challenging and tough to comprehend. Moreover, the laws have been changed so many times over the past few years that you would do better if you sought help from tax experts or solicitors so that you don’t end up paying more than necessary.
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