Stamp duty refund: Homeowners could be owed thousands after over-paying on second homes

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Currently, reduced rates of stamp duty will apply for residential properties until March 31 2021. Properties bought for under £500,000 will be exempt from paying stamp duty while those bought for more are only taxed on the amount over £500,000. Before the holiday was put in place, house buyers were spending £13billion each year on stamp duty.

In 2016, a three percent surcharge was introduced in the UK.

Those buying a second property either to live in or for buy-to-let had to pay an extra three percent in stamp duty.

HMRC issued guidance that this also applied to Multiple Dwellings Relief claims, even if they were not wholly residential.

Those buying a property for buy-to-let could reduce the amount of SDLT but only if they were purchasing two or more properties from the same vendor.

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Stamp duty advisory practice Cornerstone Tax, found that the SDLT surcharge could only apply where the transaction consisted completely of residential properties.

Tax advisors have estimated that more than £3billion worth of stamp duty was overpaid in 2015/2016 due to poor advice and confusing rules.

After several legal cases between Cornerstone Tax and HMRC over four years, HMRC has recently amended its online guidance to reflect this correction.

Many developers and investors paid the three percent on the residential part of their property, not the one percent minimum they could have claimed.

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According to Cornerstone Tax, there was a 200 percent overpayment of the tax.

Cornerstone Tax is encouraging anyone who thinks they have been affected by this to speak to them.

According to the SDLT specialists, it may be possible to reclaim as far back as when the surcharge was introduced back in April 2016.

David Hannah, Chairman and Chief Executive of Cornerstone Tax said they will continue to “challenge” HMRC in the taxpayers’ best interests.

He added: “We currently have a number of cases before the courts on multiple dwellings relief, mixed use properties, and other important issues to the taxpaying public.

“We believe that it is vital to clarify exactly what the law means, to ensure that taxpayers are not at risk of paying too much tax, simply because the Revenue choose to word their guidance in a manner which favours them.

“It remains to be seen how many cases of overpayment have occurred, but at Cornerstone Tax, we are aware of several cases where the overpayments amount to several hundreds of thousands of pounds.

“The total bill for repayments could run into tens of millions of pounds, given the popularity of ‘convert to rent’ and ‘convert to sell’ schemes, which have been run on commercial properties in the last four years.”

According to the government website homeowners can “claim SDLT relief when you buy more than one dwelling where a transaction or a number of linked transactions include freehold or leasehold interests in more than one dwelling.

“The minimum rate of tax under the relief is one percent of the amount paid for the dwellings.”

Those with an annex may be eligible for Multiple Dwellings Relief (MDR), which may result in a lowered stamp duty bill.

Many Britons may not be aware of this and could have overpaid SDLT by thousands.

Stamp duty can be calculated on the government website.

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