Stamp Duty Reclaim: Just what is the fuss all about?
A stamp duty reclaim (or a refund some may say) is an application to the government where you can claim some (if not all) your tax back that you paid when you purchased a house. A lot of people don’t know this or are unaware that this can be done. You may have received a ton of emails asking you for some details and whether you would like to apply for a rebate. Stop there and take a breath as you will be inundated with an influx of such messages, as more and more of these companies start to emerge.
Now you can do this on your own but I wouldn't recommend it if it is your first time. While dealing with the HMRC is no walk in the park so why not hire a professional that understands their language? This is what I did as I did not want to be buried under a heap of paperwork only to be told I've messed up the forms and thus don’t qualify for the rebate.
I sought a recommended accountant that was a specialist in property tax. In fact I had met him in a networking event and came across one of his social media posts which took me straight to his link. Here I filled out an enquiry form and got an invite to a zoom appointment within 48 hours. How quick was that? On the day of the call I was asked a few short questions and to describe the purchase of the property and finances obtained etc and tada! The accountant said I may have a claim. Although not 100%, as claims can be rejected by HMRC for various reasons it was certainly worth a try (especially if the account said I had a strong case).
Tip: If you don’t already have an accountant, just run a search on the search engine but I would recommend to appoint someone that comes recommended. Networking events, on-line business forums and social media are full of tax experts waiting to do their magic.
Following the zoom I received my email to make a formal application. Below I will set out the format of exactly what I did so you can have an idea of what the process is.
Background: I purchased a residential property through my limited company. The property was purchased for £74,000 and based on this amount I could possibly get circa £2,200 at the residential rates. I explained that the property was very old and derelict at the time of purchase and had a kitchen that was not functioning as the pipes were not connected to the drains. The plumbing was in a very bad state and the roof was falling in and all electrics needed redoing. Basically, the house needed to be taken back to brick and renovated throughout.
Eligibility: Based on my initial assessment, I was told I have a reasonable case to make a claim for overpaid stamp duty. This is because the information I provided indicated that the property was not suitable for use as a dwelling at the time of purchase. Therefore stamp duty should have been paid at the non-residential and mixed land rates instead of the residential property rates. On this basis the correct stamp duty liability should have been £Nil instead of £2,200, so as long as I submitted all the supporting evidence, I could make a claim from HMRC to refund the full SDLT paid of £2,200.
Services: Once I came onboard and signed the engagement letter, both myself and the accountant would prepare a detailed form, setting out the legislation and together with the evidence to HMRC for processing. This could take around 15 working days of receipt and if accepted they will write to us confirming the amount and the refund due. Once confirmed, HMRC will then issue the refund within 14 days from the date of acceptance into the nominated bank account (the accountants).
When the refund was received the appointed firm deducted their fee including vat and transferred the net amount to my business account within 2 working days. Of course, during this process, HMRC could raise any questions or queries with the claim. Luckily there wasn't anything further but if requested I would have provided a satisfactory response accordingly.
Fees: The fee for making the claim for me was 20% of the refund I’d receive from HMRC + vat. Assuming I received a refund of £2,200, then the fee will be £440 + vat and this was on a ‘no win no fee basis’. This meant that I had nothing to pay for opening the case and only paid them once HMRC agreed a refund.
Next Steps: If you’d like to instruct someone then please have the following at hand
The address of the property
A list of all the defects in the property at the time of acquisition
An itemised list of all the works undertaken to the property to make it good
Any photographic and video footage you have of the property showing the condition of the property at the time of purchase, during refurbishment and post refurbishment
Copy of the Completion statement from the solicitors
Copy of the SDLT return filed (including the reference number to HMRC)
I uploaded all these on the OneDrive provided (your chosen firm will tell you how they want it). Once we gave the instruction, together with the relevant documentation, the process started. Identification in the form of a photo ID (passport) and proof of address (drivers licence) were also provided.
TIP: Please don’t be phased by the above. I know it seems like quite a bit of legwork involved but once you get cracking it really isn’t that bad and you get a lovely little cheque at the end of it (mine came within three months)...
Own one or more properties? Think how much you could get.