If you are buying a property that needs work, HMRC has just issued a major heads up, following a recent Court of Appeal ruling in the Mudan & Anor case against HMRC. Basically, even if a home is in bits, as long as it is still fundamentally a dwelling, maybe it needs a new boiler, rewiring or damp proofing, it still attracts the standard residential Stamp Duty Land Tax (SDLT).
Here is where it gets tricky, and unfortunately, risky for buyers.
Some unregulated tax agents are approaching homebuyers, promising SDLT refunds by claiming the property is non-residential because it is uninhabitable, often on a no win, no fee basis. But if HMRC later decides the claim is bogus, you are the one left footing the bill for the full SDLT, plus penalties and interest.
HMRC is taking these claims seriously and is using both civil and criminal powers to crack down on those trying to game the system. Anthony Burke, HMRC’s Deputy Director of Compliance Assets, has been clear, if someone else files a dodgy claim on your behalf, you could end up owing more than you initially paid.
Let us break it down with a sample scenario.
Imagine you buy a property for £1.1 million, and your solicitor submits the SDLT return on the correct residential basis, meaning you pay £53,750. The property needs serious work, but it is still a home. An agent offers to get you a refund by claiming it is non-residential. They manage to secure £9,250, but after their 30 per cent fee, you only receive £6,475. HMRC investigates and rejects the claim, leaving you responsible for repaying the £9,250, plus penalties and interest, while the agent has already taken their cut and disappeared.
What can you do instead?
- Be cautious of refund offers that seem too good to be true.
- If in doubt, check official SDLT guidance or speak to a qualified, regulated adviser, because if the claim is made in your name, the responsibility is yours too.
- And if you genuinely are due a refund for a valid reason, you can claim it yourself without paying anyone a fee.
The message is simple, do not be lured into bogus refund schemes. Play it safe and stick to trusted advice when it comes to Stamp Duty.
