"Buyer - and taxpayer - beware": Homebuyers warning as HMRC gets tough on bogus Stamp Duty claims

HM Revenue and Customs (HMRC) has announced that people purchasing properties need to be vigilant of tax agents offering to secure Stamp Duty Land Tax (SDLT) repayments on their behalf where repairs are needed to a property they have bought.

Some agents have suggested that, for a fee, they can reclaim SDLT the buyer has already paid by saying that the property is non-residential because it’s uninhabitable. But making claims of this kind often leave the homeowner liable for the full amount of SDLT, plus penalties and interest.

A recent Court of Appeal judgment in the case of Mudan & Anor v HMRC has confirmed that housing (“dwellings”) in need of repair are chargeable at the residential rates of SDLT, and that repayment claims based solely on a property’s condition are not valid.

HMRC says this confirms its long-standing view that if a property requires repairs but retains the fundamental characteristics of a dwelling, it is still suitable for use as a dwelling and attracts residential rates of SDLT. A key factor in determining suitability is whether a property had been previously used as a dwelling.

HMRC says it will take decisive action on spurious SDLT repayment claims, using civil and criminal powers to deal with the minority who undermine the tax system.

Anthony Burke, HMRC’s Deputy Director of Compliance Assets, said: “The Court of Appeal’s decision is a major win, protecting public funds. Homebuyers should be cautious of allowing someone to make a Stamp Duty Land Tax repayment claim on their behalf. If the claim is inaccurate, you could end up paying more than the amount you were trying to recover.”

Michelle Lawson, Director at Fareham-based Lawson Financial, urged buyers to be cautious and to seek advice: “Where there is a loophole, there is always someone in the wings waiting to take advantage. But with this HMRC announcement, it's very much a case of buyer - and taxpayer - beware.

“There are reliefs available but it is more important than ever for buyers to take appropriate tax advice at the outset rather than risk being penalised further down the line."