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10 Jul 2020

When is Stamp Duty Not Applicable on a Renovation Project?

Patrick Cannon, one of the UK’s leading Tax Barristers, explains why some renovation projects may not be required to pay stamp duty.

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Buying and renovating a property is, clearly, a multifaceted transaction. With solicitors to chase, surveyors to organise and mortgage lenders to manage – and that’s before the renovations begin – it is easy to overlook the area of stamp duty relief. Renovators sometimes overpay stamp duty because their conveyancers either don’t have the information they need, or they wrongly decide that relief cannot be claimed. Conveyancers, on the whole, take a conservative view.

The main types are:

Second homes
Stamp duty is higher for residential properties, but the rules are so complex that many conveyancers and advisers fail to understand them properly. Some think that the 3% additional rates are payable when they are not. In other instances, they fail to factor in multiple dwellings relief, which can substantially lower the overall stamp duty charge.

Mixed-use properties
Those who renovate a mixed-use property – i.e. both residential and non-residential – are eligible to pay lower rates of stamp duty, but the definition of what is a mixed-use property is currently a matter of debate with HMRC. There are several cases currently before the tax tribunal awaiting a clearer definition.

Multiple dwellings relief
Multiple dwellings relief is worth considering for buyers who purchase a property containing more than one self-contained unit, such as one or more annexes within the house – or self-contained accommodation in outbuildings on the property.

How can renovators find out if they’re eligible to reclaim?

Renovators should check the details of a purchase and then consider whether a stamp duty relief applies. In most cases, the refund claim must be made to HMRC within 12 months and 14 days of completing the purchase.

If stamp duty has been overpaid because a conveyancer failed to claim the relief, it is possible to amend the SDLT return and make a claim to lower rates of SDLT.

How to claim back stamp duty

HMRC’s SDLT calculator enables property owners to work out the rates of stamp duty. Individuals can then write to HMRC to claim for the amount that has been overpaid.

The refund rules are complicated, but if the deadline for making a claim is missed, buyers could claim against their conveyancer.

How long does a stamp duty reclaim take?

Generally, a refund claim takes several weeks to be processed and repaid by HMRC. HMRC operates a “process now, check later” procedure, which means that they will normally pay out the refund after some basic checks. They will then examine the claim in more detail within a nine-month period after the claim.

Where the refund claim looks questionable, HMRC will open an enquiry and require detailed information in support of it. If they then disagree that a refund was due, they will issue a closure notice requiring repayment. HMRC publishes guidance on making a refund claim online, and this will save the fee charged by an advisor. However, in my experience, many people find the process of claiming back their stamp duty complex and time-consuming.

Further information....

Patrick Cannon

is one of the UK’s leading Tax Barristers

www.patrickcannon.net

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