‘Mind the (knowledge) Gap’ in Stamp Duty

Whether you’re upgrading to a bigger home, investing in a BTL property to bolster your pension, or acquiring a commercial premises, chances are that the amount of Stamp Duty Land Tax (SDLT) that you pay on the purchase isn’t at the top of your priority list. Securing a mortgage, arranging removals and dealing with estate agents and brokers take enough time as it is, and anyway, your solicitor will just send you the completed SDLT1 return form to sign, won’t they?

The problem is, quite a lot of solicitors don’t necessarily fully understand all the ins and outs of your SDLT liability. And it is your liability – SDLT is a self-assessed tax, meaning that if they get it wrong, the ultimate responsibility lies with you. When we started looking into SDLT payment processes a few years ago, we were shocked to rapidly discover just how often everyone gets it wrong.

Solicitors have been largely scared off any hint of thoroughly investigating SDLT Exemptions and Reliefs after a concerted campaign by their regulator, the Solicitor’s Regulation Authority (SRA) and HMRC. This campaign, aimed at stamping out what HMRC termed ‘aggressive avoidance’ was so blanket and scattershot as to convince most solicitors that even thinking about any SDLT saving was tantamount to professional heresy.

HMRC, for its part, has a helpline staffed by individuals who do not fully understand the legislation they’re supposed to be helping with. Add in the official HMRC online ‘calculator’ for SDLT which is not geared to cope with many scenarios, and which HMRC themselves were forced to admit in 2018 was ‘merely a guide’ rather than a tool designed to produce an accurate final number, and you can start to see where the “Gaps” are.

But getting SDLT right shouldn’t be all that hard – all it takes, like any specialised task, is the right adviser for the task. Unless your conveyancing solicitor happens to also be a TaxExpert, they’re unlikely to be able to provide that advice.

Things to be aware of when buying a property include (but are not limited to) whether it has any additional land or commercial use, whether it has outbuildings or annexes and whether any part of the property has any wayleaves or rights of way over it.

All these and more elements may have a significant impact on the exact amount of SDLT that is due for payment. If you pay too little, be sure that HMRC will pursue you for the missing money, as well as any interest it will have accrued in the interim and possibly even a penalty. If you pay too much, expect silence from them, unless you instruct a specialist adviser to engage with them and recover the excess.

There’s no one, sure-fire element to look for that will guarantee the final amount, but thankfully there is one simple method of ensuring that the right SDLT is paid, and that’s to engage a qualified professional tax adviser to examine the transaction, the property and your own circumstances, and determine exactly what your SDLT liability should be. You may end up delighted or disappointed, but the one thing you’ll definitely have is peace of mind.

*Article supplied by David Hannah, Principle Consultant and Founder of Cornerstone Tax.

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Daniel Peacock.