The government has warned that there has been a rise in cold calls made to new homeowners in an attempt to solicit fraudulent Stamp Duty Land Tax (SDLT) refunds. Rogue tax repayment agents are urging new homeowners to submit speculative SDLT refund claims, which might consequently leave them with hefty tax bills as a result of cold calls on homeowners.

After HM Revenue and Customs (HMRC) recently turned down a lot of requests for Stamp Duty refunds, the government decided to do something and sent out a warning.

Land Registry information and property search websites have been used by these rogue brokers to locate new property owners and offer refunds for Stamp Duty that was “inadvertently paid” or “unknowingly overpaid.”

According to HMRC’s most recent investigation, over 30% of refund claims for “multiple dwelling relief” did not meet the criteria and thus were incorrect.

When HMRC starts looking into these claims, it’s often after the agent has already pocketed their fee, so the homeowner is on the hook for the shortfall. As well as owing interest, people may also face fines for making false claims for refunds.

Nicole Newbury, HMRC Director for Wealthy and Mid-sized Businesses, 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.”

Check with your original conveyancer, get independent advice, and look over HMRC’s instructions on GOV.UK if you’re considering a Stamp Duty refund claim. Additionally, you can call 0300 2003 510 to reach our customer service department.

A letter from a dishonest agent claimed that a homeowner had overpaid Stamp Duty by £60,000 in a recent instance that came to light. In the correspondence, the agent made the claim that the home could be designated as two properties, contrary to the obvious fact that there was only one. It’s not just this one case; other examples include:

• A homeowner claimed that a bedroom may qualify as a separate home for the purposes of receiving ‘multiple dwellings relief,’ owing to the presence of an attached bathroom and a built-in closet that, with the addition of an electric microwave and kettle, could serve as an adequate kitchen.
• Because of the presence of a paddock that was occasionally used to keep a neighbour’s horse, the agent advised that they were entitled to lower stamp duty rates because the transaction was a mix of residential and non-residential property, which would result in a lower Stamp Duty payment if they had purchased the property.
• It was argued by the new owner of a six-bedroom house that the room above a detached garage was not used only for domestic purposes and was in fact an office space.

Additional information to be aware of

Land transaction taxes, such as SDLT, are one type of Self-Assessment transfer tax. In the period from 2019 to 2020, SDLT collected £11.6 billion.

When the value of a property transaction exceeds certain thresholds, Stamp Duty Land Tax is levied by HMRC. In some cases, you may be able to avoid paying SDLT by taking advantage of tax reliefs.

Homeowners are being warned that cold calls or letters from repayment agents claiming a return may be owed in the following instances.

• claims for relief for multiple dwellings
• claims house purchases should be charged at a lower rate because they contain something 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 on the transfer of property to pension schemes

Click through to the Stamp Duty Land Tax page to see whether you qualify for an SDLT reduction. The following are some of the most prevalent scenarios in which Stamp Duty is either waived or reduced:

• a first-time buyer of a residential property
• a first-time buyer of a shared ownership property
• a first-time buyer of a residential property
• a first-time buyer of a shared ownership property
• buying more than one dwelling where a transaction or a number of linked transactions include freehold or leasehold interests in more than one dwelling
• a building company or property trader buying a home from someone who in exchange is buying a new home from you
• an employer or property trader buying an individual’s house because they’re moving with their work
• buying a house through a compulsory purchase order
• a property developer subject to planning obligations
• a group of companies that buys or sells property to or from each other
• if you’re in an investment scheme such as a Property Authorised Investment Fund or a Co-ownership Authorised Contractual Scheme
• if you are buying property or land for a charitable purpose

It’s important to note that, to investigate a claim, HMRC has nine months to do so and will seek to recoup the full amount of tax owed, plus interest and penalties, from anyone found to be in the wrong.

Be aware that HMRC requires tax payback agents to satisfy an acceptable standard of conduct, known as HMRC’s Standard for Agents. Professional competence and adequate care must also be taken into consideration. As part of these high standards, agents are to “[take] particular care not to include figures in returns or claims which are not sustainable.”

In particular, in light of the legal precedents created in some of the preceding situations, an agent making speculative claims might be seen to have violated that provision by HMRC. Tax refund agencies must also be registered for Anti-Money Laundering monitoring, which is a legal obligation.