Recent home buyers warned over stamp duty refund claims
HMRC said it’s received a spate of stamp duty refund claims recently which have failed to meet “very specific criteria”.
It said agents have trawled Land Registry records and property search websites to target new homeowners, promising them money back on ‘unknowingly overpaid’ stamp duty.
Some of the cases include:
- A homeowner was told they overpaid £60,000 in stamp duty. The agent said the home could be designated as two properties, but HMRC said it was clearly one property.
- A claim that a bedroom could be a separate dwelling and is eligible for ‘multiple dwellings relief’ because it had an ensuite and a built-in wardrobe which “could be a kitchen if a microwave and kettle” were added.
- A homeowner claimed their house wasn’t wholly residential because a paddock behind the garden was used occasionally to keep a neighbour’s horse. The agent claimed they were due lower stamp duty rates because the presence of the paddock made the transaction “a mix of residential and non-residential property”
- A new owner of a six-bedroom house claimed it was not a wholly residential property because a room above a detached garage was used as an office.
The department said up to a third of claims for ‘multiple dwelling relief’ were incorrect and homeowners have been left to pick up the tab.
This is because the agent has taken their fee, but the homeowner has to repay incorrect refund claims with interest. Some also face penalties.
Nicole Newbury, HMRC director for wealthy and mid-sized business, said: “We are seeing obviously spurious refund claims that are never going to succeed; but will lead to an unnecessary bill for the customer.
“So, we are warning new homeowners not to get caught out by tax repayment agents promising easy money on a ‘no win, no fee’ basis. If it sounds too good to be true, it probably is. We want to help people get it right and avoid unnecessary tax bills, so treat promises of easy money with real caution.”
HMRC added that if anyone is approached about a stamp duty refund claim, they should check with their original conveyancer, take independent professional advice and check its guidance. People can also call its helpline on 0300 2003 510.
It advised people may get cold called or receive letters from agents claiming a refund could be due in the following cases:
- Claims for multiple dwellings relief.
- Claims house purchases should be charged at a lower rate because it contains something which is non-residential.
- Claims homes purchased are uninhabitable, so you are charged at lower SDLT rates.
- Claims that homes purchased with access to a communal garden mean you are charged SDLT at lower rates.
- Claims there is no SDLT due o the transfer of property to pension schemes.
Stamp duty land tax (SDLT) is a tax on land transactions. In 2019/20, £11.6bn was collected.
Second charge lending surpasses £1bn mark – Loans Warehouse
This benchmark was hinted at in the Loans Warehouse report for October.
According to Loans Warehouse’s managing director Matt Tristram, the second charge market last reached this figure in 2019. He said the £1bn target was a “benchmark for success for second charge lending”.
Its Secured Loan Index report highlighted that in October, the volume of second charge lending came to around £123.6m, which is up £13.4m on the previous month, and the highest recorded under Financial Conduct Authority (FCA) regulation. The previous peak was in 2019 at £118m.
The Q4 figures mean second charge lending witnessed its highest period of lending since 2008 and has hit a post-credit crunch record with an 11.49 per cent increase on the previous month.
However, November’s figure exceeded October’s peak as lending totalled £137.8m, with a year-on-year increase of 71.67 per cent.
The month also saw the number of loans written break the 3,000 barrier for the first time since 2008, with the 1,000 annual rise proving to be another post-credit crunch record.
The average completion time increased slightly in December but considering the growth in the last two months, it is widely considered that lenders’ service levels are being met and the increase is more reflective of delays caused by a Land Registry backlog.
Consolidation and home improvements accounted for 32 per cent of second charge loans, while consolidation alone made up 43 per cent of lending which was the largest share. Home improvements alone made up 18 per cent of second charge loans in November.
Tiny number of homes protected by Land Registry alert service
That’s according to the results of a new Freedom of Information request from legal tech firm Thirdfort.
It found that in the seven years since the service was launched, just 275,537 people have signed up to the property alert service. Given there are approximately 29 million homes across the country, that works out at fewer than one per cent of owners.
The study follows recent news reports about Reverend Mike Hall, whose identity was stolen by scammers who went on to sell his property in Luton without him realising. He had been away from the property for some time working in Wales, and was only alerted to the situation when his neighbours got in touch to inform him that builders had started working on the property.
The Land Registry’s property alert service allows owners to register up to 10 properties to be monitored. They will then be emailed an alert whenever an official search takes place against the property, as well as when an application is made to change the register, allowing owners to act should they receive an unexpected alert.
Olly Thornton-Berry, co-founder and managing director of Thirdfort, noted that property title fraud often involves a fraudster using forged documents to impersonate the legitimate owner, and pointed out that empty homes, tenanted properties and those without a mortgage are most at risk.
“As gatekeepers to the property market, estate agents and conveyancers have a key role to play in spotting fraudulent attempts to buy property,” he added.
“Yet, there are also some simple steps that homeowners can take to minimise the risk of such fraud. So, it’s worrying that so few have taken this opportunity, particularly as fraudsters become increasingly sophisticated.”
Lifetime mortgage product switches slump by a third in Q1
The number of lifetime mortgage customers remortgaging fell by 34 per cent this year, according to mortgage broker Responsible Life.
Some 331 lifetime mortgage holders moved to new providers in the first quarter of 2021, compared with 498 in Q1 2020 according to latest figures obtained from the Financial Conduct Authority (FCA).
The pace of switching also fell 28.9 per cent in the year to March 2021, dropping from 1,824 to 1,297.
However, the rate at which homeowners are rebroking their lifetime mortgages has risen by 44 per cent overall in two years, up from 230 in Q1 2019 coinciding with the market seeing a big jump in remortgaging. Responsible Life said this was likely down to borrowers taking advantage of rates dropping between three and four per cent at that time.
Currently, around four in every 100 equity release customers are switching each year, out of more than 300,000 outstanding mortgages.
Steve Wilkie, executive chairman of Responsible Life, said: “Lifetime mortgages don’t stop people switching to cheaper rates and it’s not just older borrowers who can benefit.
“Long time customers may have seen rates fall furthest but younger retirees have the added advantage of a longer remaining mortgage term.
“Persistent misconceptions around the switching of lifetime products could be behind the slowdown in remortgaging that we’ve seen so far this year. The key message for consumers is that larger early repayment charges (ERCs) aren’t necessarily an obstacle to saving money and the younger you are, the less the interest rate needs to fall for switching to pay dividends.”
Land Registry UK house price index to return next week
The body paused publication of the index in May with its last set of data being for March, noting that there was insufficient data to make an accurate estimation of house prices while the UK was in lockdown.
It did however continue publishing data on the number of housing transactions which took place during the crisis.
Land Registry said it will begin by publishing the April 2020 index on 19 August with May and June to follow at two-week intervals as it catches up.
July and then August data will then be published in October as the body aims to return to a normal schedule.
“We’ll be working to a provisional publication schedule that will see us publish interim releases with a view to resuming normal publication in October with the publication of the August 2020 index,” Land Registry said.
“The schedule will ensure we can use as many transactions as possible in each of the suspended periods following the issues caused by the coronavirus outbreak.”
It also highlighted that as per its usual revisions policy, the figures for all months are first estimates and are subject to revision in subsequent periods.
It’s provisional publication schedule is: April index on 19 August, May index on 2 September, June index on 16 September, July index on 7 October, August index on 21 October.
Land Registry launches electronic signatures for homebuying
Electronic signatures can now be used to transfer the ownership of properties, secure mortgages, create leases and complete other property related transactions.
But the government body will only accept e-signatures if the digital signing of the documents has been witnessed by someone present at the time, who also signs the documents electronically.
The new guidance on the use of electronic signatures will allow the providers of electronic signatures to develop new affordable and accessible tools for conveyancers to use.
Simon Hayes, chief executive and chief Land Registrar, said: “What we have done today is remove the last strict requirement to print and sign a paper document in a home buying or other property transaction.
“This should help right now while lots of us are working at home, but it is also a keystone of a truly digital, secure and more efficient conveyancing process that we believe is well within reach.”
HM Land Registry is already holding further discussions with the sector to explore removing the need for a witness by using secure technology that can verify an individual’s identity.
Sam Mitchell, chief executive of estate agent Strike, said: “This is arguably a long-overdue step for the property market – but an encouraging sign of the industry finally making a move towards greater digitisation.
“Although it might be a small change, it’s an important one, helping to speed up the process of moving and making it easier for all.”
Adam Forshaw, managing director of conveyancing firm O’Neill Patient, said: “Even before Covid-19 and social distancing, there was significant demand for a more tech-driven process.
“But one of the biggest problems facing the property sector in lockdown was the ongoing requirement for ‘wet-ink’ signatures.
“The Land Registry is to be commended for moving quickly from consultation to new guidance. We look forward to working with them on their additional proposals to accept ‘qualified electronic signatures’, which will further improve security and remove the need for a witness altogether.”
Land Registry changes ID verification and deed signatures during coronavirus
From 4 May, verification will not be limited to conveyancers and chartered legal executives with retired solicitors, regulated financial advisers, doctors, dentists, teachers among the professions that will also be able to confirm identity.
Furthermore, verification can be done by a video call.
The Land Registry will also accept deeds that have been signed using the ‘Mercury signing approach’.
This is a signature page signed in pen and witnessed in person, with the page then scanned or photographed to create a PDF or jpeg, with each party sending a single email to their conveyancer which is then attached to the final copy of the document.
March property transactions remain static – HMRC
The transactions, which are counted when the sale is recorded by the Land Registry, were 0.2 per cent lower than February.
HMRC’s data reflects the market before lockdown restrictions were put in place in-mid March.
Among other social distancing measures, people were stopped from moving home, physical valuations were paused and in-person viewings were stopped.
Activity in the non-residential market was much slower last month than the previous March.
Some 9,470 transactions took place last month which was 8.8 per cent lower than March 2019, and 1.8 per cent lower than the previous month.
A recent forecast from property group Knight Frank painted a gloomy picture of the housing market in 2020.
The firm predicts there will be 350,000 fewer mortgages approved this year because of the coronavirus outbreak and lockdown restrictions.
More than 150,000 mortgages to first-time buyers will be lost, as a total of 526,000 home sales go up in smoke, creating a ripple effect on the wider economy, it estimated.
Almost £8bn will not be spent on DIY and renovations, while £395m less will be spent on removals companies. Lost stamp duty revenue and VAT could reach £4.4bn and £1.6bn respectively, Knight Frank calculated.
Annual house prices see weakest growth in six years
This was below than 2018’s annual increase of 3.3 per cent, and weaker than the 2.6 per cent growth seen in 2013.
All regions saw a drop in growth; England’s prices increased one per cent compared to 2018’s three per cent and prices in Scotland grew 1.8 per cent compared to 4.6 per cent the year before.
In Wales, a four per cent growth was seen, down from 2018’s 4.8 per cent and Northern Ireland saw house prices rise by 3.5 per cent. This was a slowdown from the region’s 4.6 per cent rise in 2018.
Locally, the strongest growth was seen in North Devon, where the average price of a house rose 8.9 per cent to £247,590.
Three of the top five local areas to see strong growth were in Wales. Land Registry attributed this to the removal of the Severn Bridge tolls making it more affordable for those who work in Bristol to live on the Welsh side of the River Severn.
The biggest falls occurred in Kensington and Chelsea, where the average house price dropped 7.7 per cent to £1,256,713.
Four of the five local areas which saw the weakest growth were in London and the South East. Land Registry said this followed a “general slowdown” in the London property market since mid-2016 and was probably due to the area being “disproportionately affected by regulatory and tax changes”.
Land Registry reveals another big drop in new build purchases
It found that just 9,699 of the sales registered were on newly-built homes.
This follows the figures for November, when new-build sales were down by 19 per cent on an annual basis.
In total 83,715 sales were registered in December, down from 92,152 in November and 95,307 in October.
Of these, 64,012 were for freehold, down 5.5 per cent from the same month in 2018.
The most expensive residential sale during the month was the £39.5m paid for a flat in the City of Westminster, while at the other end of the scale a terraced property in Seaham, County Durham, went for just £20,000.
On the commercial side, the largest deal was for more than £125m for a property again in the City of Westminster, dwarfing the £350 paid for a commercial property in Lytham St Annes.
Around 453 sales in England and Wales were for £1m or more, with 275 of those taking place in greater London. Two were in the West Midlands, two were in Greater Manchester, while one was in Wales.