Consultation on proposed changes to Stamp Duty calculation
HMRC is consulting on planned changes to the rules for calculating Stamp Duty Land Tax (SDLT) on purchases of mixed use properties and multiple dwellings in England and Northern Ireland.
The consultation is a response to the increasing number of cases in which buyers of residential property misrepresent SDLT in order to qualify for a lower rate. This is often with the support of ‘SDLT reclaim agents’ who approach property owners after they have already paid SDLT at the correct rate and offer to act on their behalf to secure a partial refund.
Reclaim agents exploit the slightest possibility of non-residential use of part of a property (such as the existence of a garage that could be leased out) to claim that the whole property is liable for the lower non-residential rates of SDLT. They also submit claims for Multiple Dwellings Relief by misrepresenting the number of ‘dwellings’ within a property, for example by claiming that a room with its own toilet and washbasin is a separate dwelling.
According to HMRC, the scope for abuse within the existing rules has led to growing numbers of conveyancers facing unjustified negligence claims from property purchasers, simply because they submitted correct SDLT returns instead of attempting to secure a lower rate.
The consultation proposes a system of ‘apportionment’, under which the residential part of a mixed property purchase would be taxed as residential property and only the non-residential part would be taxed at the lower rate. Proposals in the consultation for preventing abuse of Multiple Dwellings Relief include awarding it only where all of the dwellings in a single property are purchased for a ‘qualified business use’.
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