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Stamp duty: The UK’s long ignored tax scandal

David Hannah, founder and principal consultant, Cornerstone Tax

One in six property buyers in the UK could be overpaying on stamp duty land tax (SDLT). Cornerstone Tax, which specialises in helping people claim SDLT refunds from HMRC, knows that the number of people who realise an overpayment is much lower. In the current environment, this consumer issue is more important than ever.

Why people are overpaying SDLT

There are many reasons that lead to SDLT overpayments, but two that standout in particular. The first is that HMRC’s stamp duty calculator, used by millions of people throughout the UK, only provides correct information for basic residential or commercial purchases. This omits mixed use properties that are common, especially in rural areas.

The second most common reason that people pay too much stamp duty is that they are advised by solicitors who specialise in property law, rather than property tax law – which is unfathomably complex. Existing SDLT legislation is a political football and has been amended more times since inception than any other comparable UK tax.

Similarly, HMRC operates a blanket pay first and ask for a refund later approach that makes solicitors firms nervous to advise mixed use rates where they may not be obvious (to a non-tax expert). Of equal concern, HMRC has no facility in place to check if people have overpaid their SDLT.

HMRC’s aggression on all fronts has even recently been reported by the House of Lords and leading media. So has HMRC’s willingness to ignore its own published guidance. In a recent stamp duty case HMRC’s solicitors informed the judge that their own, recently updated, stamp duty guidance had “less significance than a textbook” and should not be factored into his decision on a case.

Why this issue is more important than ever

The tragedy and everyday challenges that coronavirus has inflicted on the UK populace are, as we all know, unprecedented. The public and private sectors have been working hard to support the economy, while the healthcare system and front line workers have earned a newfound respect for their absolute dedication to the care of UK citizens.

However, it has been reported widely that financial worries and strains associated with furloughing, unemployment, and broader disruption are keenly felt by UK residents and their families.

If the data shows that one in six people who have purchased a new property since May 2017 could be owed a refund on their stamp duty bill, which at a minimum likely represents thousands of pounds, government must take action to force HMRC’s unwilling hand.

Until HMRC is made to ensure that all taxpayers and professionals have access to appropriate, working tools to calculate tax payments accurately or pre-empt a refund rather than follow the approach of ‘pay now ask questions later’, SDLT in the UK will continue to be a national scandal and betrayal of UK taxpayers everywhere.

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