Stamp duty land tax

SDLT saving opportunities

If you have bought property in Essex or beyond, the chances are that you paid Stamp Duty Land Tax (SDLT) – but have you considered whether you have paid the correct amount of tax?

In England and Northern Ireland you’re usually liable to pay SDLT on increasing portions of the acquisition price when you buy property or land costing above a certain amount.

SDLT has become much more complex in recent years, especially following the advent of the 3% surcharge for second properties and the multitude of reliefs available on some transactions. It has become apparent that a number of clients have overpaid their SDLT liability as they and their conveyancer were unaware of the reliefs that their property purchase qualified for.

SDLT can be at such a high level that many firms are offering schemes to reduce the SDLT payable, or to pay none at all. Most of the time, these schemes are convoluted and involve inserting artificial steps. HMRC have been cracking down on purchasers using such schemes as they simply do not work. When a scheme is proven not to work the buyer will have to pay the shortfall of SDLT to HMRC, plus interest and penalties. In addition, the cost of the scheme will likely have been a hefty proportion of the “saving”, as much as 30% in some cases, and it is unlikely that this will be recoverable from the scheme operator.

At Gepp Solicitors, we do things differently. We don’t involve artificial holding companies or include many complex transactions. We adhere to the Finance Act 2003 and, with our expertise, your SDLT bill can be reduced significantly. As part of the ethos of Gepp Solicitors we do not condone or endorse any tax avoidance schemes, and if clients come to us with details of a scheme that they have been offered we would never recommend that they enter into it. We only advise on legitimate methods that use current legislation to reduce your SDLT liability.

Whilst there are several available SDLT reliefs there are three main reliefs with which we have enabled our clients to make significant SDLT savings or enable repayments to be claimed.

Based on current legislation, the three main methods of reducing SDLT are:

• Mitigating the 3% surcharge on additional properties,
• Identifying non-residential aspects of a residential purchase, and
• Claiming Multiple Dwellings Relief (MDR)

All of the above are fully legitimate ways of reducing your SDLT bill and do not involve any convoluted schemes or artificial steps. Each method is described further below.

Mitigating the 3% surcharge

The chancellor’s 2016 Budget was a concerted attack on the buy-to-let market and the introduction of the 3% surcharge was the pinnacle of this attack. This additional rate of SDLT applies to purchases by individuals of residential property that is considered a second (or more) property, trusts and companies buying residential properties.

An additional 3% on the purchase price of a property can be a huge amount. On a property costing £400,000 the surcharge alone is £12,000, meaning a total amount of SDLT could be due of £22,000.

However, under certain circumstances and with the help of Gepp Solicitors, it may be possible to mitigate the additional charge.

Mixed-Use

The mixed use rules can be used to reduce the SDLT arising on a purchase in certain circumstances. Legislation states that a transaction that consists of, or includes, land that is not residential property the non-residential rates of SDLT are charged.

Under the current legislation, if any of the purchase contains a commercial element, then the whole purchase is ‘tainted’ and, as a result, the whole purchase price benefits from the lower rates.

Furthermore, non-residential property does not suffer the higher rate charge so if property being purchased would otherwise be subject to the 3% surcharge and it is deemed to have mixed use, then the 3% charge would not apply

This all seems very straightforward but in reality the position is definitely not quite so clear cut. This relief can have large potential savings because the non-residential property rates of SDLT are significantly lower than the residential rates, especially when property prices exceed £925k.

Multiple Dwellings Relief (MDR)

Current legislation can allow for SDLT relief to be claimed under the multiple dwelling rules, when multiple residential properties are purchased in a single transaction. The relief works by calculating the SDLT on an average purchase price and then multiplying that figure by the number of dwellings.

In addition, the SDLT legislation currently can allow for a Multiple Dwellings Relief (MDR) claim on a purchase of a residential property with an annex whilst still not being caught by the 3% surcharge. This potential saving can be significant.

The key is identifying whether more than one property was purchased.

Most people would easily be able to identify when two houses are purchased, but have you considered a converted garage, outhouse or granny flat?

Case studies

We have successfully claimed refunds or reductions of the SDLT payable for many of our clients.

Frank & Marie

Frank and Marie bought a £1.35m house in a local village a couple of months before contacting us. They paid £78,750 in SDLT costs on purchase. The house was intended to be their main residence and they sold their previous home on the same day they purchased this property. They do not own nor have any interests in other properties.

The house has a small paddock and stables for a horse to two, a couple of large sheds used for storage and a small barn that had been converted into a residential dwelling. The converted barn met the requirements for consideration as a dwelling.

We reviewed the purchase for Frank and Marie and determined that a claim could have been made for multiple dwellings relief. We prepared the necessary paperwork to make a claim for multiple dwellings relief and obtained a SDLT refund for Frank and Marie of £31,250.

Ray & Deborah

Ray and Deborah were selling the house which was their only residence and purchasing a house to be their replacement residence for £700,000. The new house had a flat attached and it was their intention to let this flat until Ray’s elderly parents needed to move in.

They also owned a further property worth about £300,000 which was rented out.

Ray and Deborah were concerned about the 3% additional rate of SDLT that they had heard would apply as they had more than one property.

We were able to advise them that the 3% surcharge wouldn’t apply as they were replacing their main residence. We were also able to make a claim for multiple dwellings relief due to the flat attached to the main property which further reduced the SDLT payable by £10,000.

At Gepp Solicitors, we can assess your property if you think that you might be able to claim a relief.

As with any relief, there are a number of complex criteria that must be met to ensure your additional property qualifies. It is not always straightforward to know if a property counts as a single dwelling or as more, nor whether you could save money, or receive a refund.

Therefore, if you believe we will able to assist you with a claim please send us the information as soon as possible, before you are out of time.

As with all potential tax repayment claims there’s a time limit that applies. For SDLT, the period is 12 months and 14 days from the date of completion. This time period can be extended to 4 years in certain circumstances however it can be difficult to argue that this additional time should be allowed.

SDLT is a specialist area and advice should always be obtained before submitting a claim. Gepp Solicitors have extensive experience with providing SDLT advice and can assist with determining if your purchase qualifies for a valuable relief and whether the claim will be successful.

Get in touch with our SDLT solicitors in Chelmsford, Essex

To see if a review of your position would be beneficial please contact Marc Dorsett in our Private Client department. Marc would be pleased to talk to you to see if any claim can be made or refund obtained.

If you want to find out more about the services we can offer you, please feel free to get in touch with our solicitors.

Call us
Main number: 01245 343980

Email us
Main email: privateclientenq@gepp.co.uk

Gepp Solicitors have extensive experience with providing SDLT advice and can assist with determining if your purchase qualifies for a valuable relief.

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