Thousands of homeowners could be owed stamp duty refunds

Posted: 2/12/2020

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Thousands of homeowners could be entitled to stamp duty refunds from HMRC, according to one tax expert. David Hannah, founder of stamp duty advisory practice, says that a significant number of people have unknowingly overpaid on stamp duty, and could be eligible to claim back thousands of pounds.

He said: “Stamp Duty Land Tax is confusing and, on the whole, poorly understood. Many of its lesser known intricacies allow homebuyers to benefit from paying reduced stamp duty rates.

“In many cases, homebuyers are not aware that these intricacies exist, and end up overpaying on stamp duty.”

Hannah points out that some homebuyers may find that ‘commercial activity’ on their land turns a residential property into a ‘mixed use’ property in regards to stamp duty, so they are only liable for the lower non-residential rates.

To qualify, the house (or land) merely has to generate a business income. This comes in many forms, from having a commercial business operating on-site to renting or licensing part of the buildings or land to someone else to use (known as property business income in HMRC terms).

The important thing to note, according to the tax expert, is that it does not matter how little of the land is used or how small the income is. The fact that any of it used is conclusive that the owner should not be paying, or have paid, the residential rate.

When it comes to Wayleave Agreements, this essentially gives rights to utility companies to install, place or run their equipment in or over the land that your property sits on, in order to provide power, water, or sewerage to the UK

In return for granting the right to use this land, the utility company will usually pay a fee, similar to a tenant paying rent to a landlord.

Therefore, this qualifies the property as a ‘commercial use’ one, and allows people to pay the lower non-residential stamp duty rate at the point of purchase.

In addition, Hannah highlights the fact that buying properties with a granny annexe has become an increasingly popular choice among buyers looking for somewhere with long-term flexibility.

The benefit of owning a property with a self-contained annex is that the property owners could be eligible for Multiple Dwellings Relief, meaning they could pay a reduced stamp duty fee.

Hannah added: “Since the start of the initial [coronavirus] lockdown in March, we have been inundated with requests to look into whether people have overpaid on stamp duty. The effects of the pandemic have made people more aware of their personal finances, and many who previously wouldn’t have bothered to look into whether they had overpaid, are now seeing this as an opportunity to get some extra cash quickly.

“It remains to be seen how many cases of overpayment have occurred, but at Cornerstone Tax, we are aware of several cases where the overpayments amount to several hundreds of thousands of pounds.”

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