Kundan Bhaduri, property developer and portfolio landlord at The Kushman Group, said the Bewley versus HMRC judgment last year had “opened a veritable Pandora’s box” of stamp duty refund claims.
The case, which occurred in 2019, found that a bungalow and plot of land with planning permission for demolition of an existing dwelling and replacement was not suitable for residential use at the effective date of the transaction, therefore should not be subject to higher three per cent rates of stamp duty.
This saved the developer considerable upfront costs for the residential development.
He noted that while a number of claims were “genuine”, several “fly-by-night operators” had cropped up.
“I get contacted by them regularly, as I’m a portfolio landlord. They claim to get unsuspecting home buyers refunds on stamp duty for basic defects in their properties such as damp or mould or unmodernised houses.
“These cases are way outside of the HMRC judgement and do not warrant a claim for a stamp duty refund,” he noted.
Bhaduri said that since the HMRC operated on a “refund now, investigate later policy”, the firms get a “hefty share of the claim and then leave their clients open to investigations and penalties later on”.
“Be wary of them as many might not be around when HMRC comes knocking on your door,” he noted.
Lawyers report rise in stamp duty enquiries
Tahina Akther, barrister and co-founder at Wildcat Law said the firm had seen a rise in stamp duty enquiries and that there were “undoubtedly” a “number of genuine cases where significant errors have taken place”.
“The problem for many of those impacted is that they may end up handing over a large proportion of any sums recovered unnecessarily. Our advice for anyone who believes they may have a claim is to contact an Solicitors Regulation Authority regulated law firm for advice if they are not confident of managing the process themselves.
“Where there is an issue, someone will always find a way to monetise it, so be wary of stamp duty refund firms that may not have your best interests at heart,” she added.
Zaeem Khan, director at RMZ Law Office, noted that one of the main source of negligence claims against solicitors was incorrect stamp duty calculations, so there was “no surprise these companies are operating”.
He continued: “Property lawyers must have a solid relationship with at least one specialist stamp duty adviser who they can turn to for help.
“Property lawyers are also advised to clearly highlight their limitations of stamp duty rules in their engagement letters so that clients are not surprised when their matter is referred to an stamp duty specialist and the specialist’s fee is payable. It’s property lawyers against the world in the current framework.”
‘Avoid third parties where you can’
Emma Jones, managing director at Whenthebanksaysno.co.uk, continued that her firm would encourage clients to seek advice from the solicitor on stamp duty or to contact the HMRC directly .
“Avoid third parties where you can as you will be liable for the tax if HMRC demands its money back. Third parties will often mislead the public by offering a chance to have these large sums refunded but the issues arise later down the line when HMRC sees that the stamp duty has been refunded incorrectly.
“This could be costly to the individual, at which point the commonly known ‘ambulance chaser’ is nowhere to be seen,” she explained.
Samuel Mather-Holgate, independent financial adviser at Mather and Murray Financial, agreed, noting that HMRC guidance was complex and it was understandable how such firms had cropped up.
He said for those seeking a stamp duty refund, it was “probably cheaper and easier to speak to a local property lawyer who will be able to tell you very quickly if you are”.
“If you are up to speed on the regulations yourself, you can apply for a refund through the Government Gateway and it will take all of five minutes,” Mather-Holgate noted.
He added that the main reason people could be due a refund was that they bought a second property to replace their main residence but didn’t sell their property until after the purchase of their new home was completed.
Riz Malik, director at R3 Mortgages, said accountants could be unfamiliar with stamp duty and defer to lawyers.
However, he said that as lawyers were not tax experts then there could be cases where the incorrect amount of stamp duty is paid.
“HMRC publishes the guidelines, and there is a stamp duty helpline if you have any questions. If that fails, you could engage the services of a qualified tax adviser who specialises in stamp duty to assist you. If you do, it is important you are aware of their costs and charging structure from the outset,” Malik explained.
A HMRC spokesperson: “Customers should be careful when responding to online adverts from repayment agents, check who they are dealing with before handing over personal information, and should carefully read terms and conditions to understand what they’re signing up for.
“People can make their own claims direct with us online at Gov.uk or via post. This will ensure they get to keep 100 per cent of any money that they are due.”
