Everything You Need To Know About Stamp Duty Land Tax
Are you aware that you may be paying too much in stamp duty land tax?
What is Stamp Duty Land Tax?
You must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England, Wales and Northern Ireland. If you live in Scotland, SDLT no longer applies. Instead you’ll pay Land and Buildings Transaction Tax when you buy a property.
The current SDLT threshold is £125,000 for residential properties and £150,000 for non-residential land and properties.
You pay the tax when you:
- Buy a freehold property
- Buy a new or existing leasehold
- Buy a property through a shared ownership scheme
- Are transferred land or property in exchange for payment, e.g. you take on a mortgage or buy a share in a house
How Much is Stamp Duty Land Tax?
How much you pay depends on whether the land or property is:
- Non-residential or mixed-use
You can use HM Revenue and Customs’ (HMRC) Stamp Duty Land Tax calculator to work out how much tax you’ll pay.
You may be able to reduce the amount of tax you pay by claiming relief, e.g. if you buy more than one property (‘multiple dwellings’).
The Value You Pay SDLT On (The ‘Consideration’)
The total value you pay SDLT on (sometimes called the ‘consideration’) is usually the price you pay for the property or land.
Sometimes it might include another type of payment like:
- works or services
- release from a debt
- transfer of a debt, including the value of any outstanding mortgage
Find out how to work out the consideration if your situation is complicated.
How and When to Pay
You must send an SDLT return to HMRC and pay the tax within 30 days of completion.
If you have a solicitor, agent or conveyancer, they’ll usually file your return and pay the tax on your behalf on the day of completion and add the amount to their fees. If they don’t do this for you, you can file a return and pay the tax yourself.
There are certain situations where you don’t need to send a return. Read more about exemptions and reliefs.
Incorrect Stamp Duty Land Tax Payments
Due to confusion surrounding Stamp Duty Land Tax, HMRC have realised that Stamp Duty payments received are increasingly incorrect and have opened a department to handle refund claims.
SRK has therefore added an exclusive service to all our current clients and to our Property Accountant Package to offer the opportunity to ensure that you are not over paying and to claim a refund, where appropriate. To discuss this further, please contact your dedicated associate or book a free consultation to discuss.
Why Could the Stamp Duty Paid Be Incorrect?
Property transaction tax is not simple, as it not only involves the price paid but also the property’s current, past and future usage, ownership history, seller’s position, buyer’s position, geographical location and liabilities.
Increasingly, this tax calculation is done in house without tax advice.
Specialists have stated that up to 40% of property transactions may have led to the wrong Stamp Duty being paid.
How Can a Refund Be Requested?
It can be done using a specialist to forensically review past property tax transactions to ensure that the correct stamp duty tax has been paid and advise if a reclaim is available.
Is Everyone Eligible?
If any entity has paid an incorrect amount to the revenue, then you have the right to ask for it back.
This can be an individual, partnership, LLP, Limited Company, or PLC.
Why Do I Need a Specialist?
To reclaim an overpayment, it must be proven that the rate of duty paid was wrong and why.
To prove this, you need a deep understanding of property tax and reliefs available, along with case and tax law. Most lawyers have a brief understanding but the specialist we work with lectures on this subject to lawyers. He also reviews and plans both UK and non-UK property owner property tax strategies.
Is This a Scheme?
No, as a scheme is normally defined as a method to reduce tax payable. Whereas, this duty has already been paid. We’ll help you reclaim an overpayment that has already been paid.
Is Any Property Eligible?
Any type of building is eligible including residential, BTL or commercial.
The only criteria are that the building cost more than £500,000 and was purchased within the last 4 years.
Recent Stamp Duty Tax Reclaim Successes
Here are examples of recent success stories.
Mr K purchased a property for £2.8m in March 2014 paying £197,750 stamp duty. Our expert reviewed the transaction and refiled as the property consisted of mixed use. HMRC agreed with the filing and have issued a £84,000 refund.
Mr H is a partner in an LLP, he was advised and had paid full duty on a £1m + purchase of an industrial estate. Upon investigation by our SDLT expert, a clear link was established between the seller and purchaser, as they were related even though the seller was a limited company and the buyer an LLP. We then refiled with HMRC who have agreed and issued a refund of £42,000
A property being acquired by a Company was ‘advised’ that 15% rate applied, tax of £126,000. Investigations into property and its use revealed that it was used in a trade and was a mixed use. Refiling of the claim has resulted in a reduction of £94,000
A PLC brought a development for £1.7m, paying duty of £82,000. Investigation confirmed that the development was multiple dwellings not one. Refiled with HMRC who have agreed to refund £62,000
Join us on the 13th of July to find out why financial issues do not have to be the end of your business! Learn what you should be doing now to prepare for the unexpected.
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