Property investors and developers could be entitled to stamp duty refunds

HMRC has changed what has been termed as ‘incorrect guidance online’, meaning that property investors and developers could be owed hundreds of thousands of pounds in stamp duty refunds.

The guidance surrounds the 3% stamp duty surcharge introduced in 2016, on the acquisition of second homes or residential properties that were bought for investment purposes. HMRC issued guidance that this also applied to Multiple Dwellings Relief claims, even if they were not wholly residential.

Consequently, those who have paid 3% stamp duty surcharge on a mixed-use multiple dwellings relief claim since 2016 “will be entitled to a refund”, according to David Hannah, chairman and chief executive of Cornerstone Tax.

The stamp duty advisory practice has long championed the fact that stamp duty should only apply where the transaction consisted wholly of residential properties. They found that in certain circumstances, the default minimum rate of 1%, which remained on the statute book, was still in force.

Following several legal cases between Cornerstone Tax and HMRC over the past four years, HMRC has just this week amended its online guidance to reflect this correction.

The implications of this ‘misguidance’ are that many developers and investors have overpaid on this tax by 200%, and could be owed refunds worth several hundreds of thousands of pounds.

Hannah said: “As a firm, we will continue to challenge capricious and legally incorrect HMRC interpretations of the law, where we believe it is in the taxpayer’s best interests. 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.”

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