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Does the HMRC changes to stamp duty mean you’re entitled to a refund?

HMRC has recently changed its guidance for stamp duty and multiple dwellings relief claims. How have the changes impacted you and are you entitled to a stamp duty refund?

Last month, HMRC changed its guidance surrounding the 3% stamp duty surcharge on second homes or property investments in the Stamp Duty Land Tax (SDLT) Manual. The changes state that the 3% surcharge will not apply If an investor purchases a non-residential property or a mixed-use property. These transactions will instead be taxed at the non-residential rates of stamp duty.

Also, when a buyer purchases more than one property in the same transaction or within a linked transaction, multiple dwellings relief is available. This can significantly reduce the stamp duty bill. However, when this relief is claimed on a mixed-use property, this is when things become complicated.

Before now, HMRC issued guidance that was deemed “incorrect” that the additional 3% stamp duty surcharge on second properties also applied to multiple dwellings relief claims for mixed-use purchases, even if the properties were not entirely residential. 

The updated manual now states that HMRC’s 3% surcharge only applies to the purchase of non-residential or mixed-use land if both of the following conditions are met:

  • multiple dwellings relief is claimed on the residential part of the transaction
  • the non-residential piece of the transaction is “negligible or artificially contrived”.

This has been welcome news for many although, some in the industry, feel that the HMRC’s interpretation of these terms needs to be more detailed in its clarification.

The Overpayment of stamp duty

This change to the guidance means property investors who have paid the 3% stamp duty surcharge on mixed-use multiple dwellings relief claims are potentially entitled to stamp duty refunds. Suggestions are made that stamp duty should only apply when the transaction consists entirely of residential properties

As the purchase and use of mixed-use developments increases, the change in HMRC’s guidance will likely have an impact on many property investors and developers. With experts suggesting that the total bill of stamp duty refunds could be in the tens of millions of pounds.

The complications with stamp duty

The subject of Stamp duty being incredibly complex, especially when it comes to property investment, which can lead many investors and developers to overpay on stamp duty. A number of problems can come up when calculating a stamp duty bill. It can get especially complex when an investor is buying multiple units as one property investment transaction.

Many assumed that the current stamp duty holiday would make things easier for the time being, but it has actually made them more complicated for investors. Additionally, a short time limit is now put on solicitors and conveyancers as property sales continue to rise. This puts these professionals under added pressure as getting stamp duty right could lead to delays and miscalculations.

If you are unsure how stamp duty could impact you or your property purchase, our residential tax experts can give you advice. For more information, please get in touch.

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