Esther Marshall
Legal
How Companies are Encouraging Buyers to make Unfounded Claims Regarding SDLT Refunds
Warren Gordon and Morris Graham of HMRC report that the Law Society is being contacted by conveyancers concerned with the approach being taken by some agencies that offer help with stamp duty land tax (SDLT) refunds.
Some of these firms are set up by people with little or no expertise in the tax and pay little or no regard to HMRC’s guidance on standards for agents. These repayment agents often contact purchasers directly after the purchase, using Land Registry records to identify properties.
For Example: Sam bought a property in Leeds and the seller was a musician. The house has not been refurbished for years, but had a soundproofed music room, audio and recording equipment and two vintage armchairs. He agreed to acquire these for £5000 with the purchase. The total paid was £305,000. After the purchase, Sam came across a social media advert from OLR Tax, where the company claimed they were specialists in obtaining refunds for people who had overpaid SDLT on chattels (chattels are tangible, movable personal possessions). Sam spoke to the company who told him he should not have paid SDLT on anything left at the property. The company calculated that as the property needed refurbishing, they calculated it would cost £55,000 (to replace carpet, lights, furniture and curtains). They then wrote to HMRC to amend Sam’s SDLT. They claimed a refund of £2750, half of which was passed to Sam.
HMRC opened a compliance check into the amendment and concluded it did not reflect a ‘just and reasonable’ apportionment. The chattels had been valued ‘as new’ when it was clear no value had been placed on these (carpets, lights, furniture and curtains). Only the money for the audio recording equipment and armchairs reflected consideration for a non-land transaction. Sam must now repay £2,750 plus interest and penalties even though OLR Tax only paid Sam, £1375 after deducting fees.
Vernon Sellahewa, a Solicitor in our Residential Property department, said:
“It is the responsibility of the tax payer to ensure the SDLT is correct as it is a self-assessed tax. Here at Mullis & Peake, from the outset of a property sale, we advise that our clients obtain specialist tax advice. From the above, it is clear that the tax advice must be sought from a reputable company to avoid the need of potential repayments to the HMRC.”