The Law Society of England and Wales says it is being contacted by conveyancers concerned by ‘spurious’ claims and agents ‘pushing boundaries’ when it comes to stamp duty land tax (SDLT) claims and repayment.
It says purchasers and conveyancers are being contacted by organisations with ‘little or no expertise in the tax and pay little or no regard to HMRC’s guidance on standards for agents’ offering advice on how to claim reliefs associated with chattels apportionment, properties ‘not suitable for use’ and ‘communal facilities’.
“The Law Society is concerned about the approach being taken by some agents that offer help with stamp duty land tax (SDLT) refunds,”
said Law Society of England and Wales president Richard Atkinson.
“Some of these firms are set up by people with little or no expertise in SDLT and pay little or no regard to HM Revenue and Customs’ (HMRC) guidance on standards for agents. The Law Society and HMRC have joined forces to warn people of the risks associated with SDLT repayment agents and to explain how solicitors can take steps to protect clients.
The Society explains how companies use Land Registry records to identify potential properties and reach out directly to home owners.
Ryan Hannah Managing Director of Compass, says there has been an erosion of trust with the knock-on impact being legitimate claims are being delayed
“The rise in spurious SDLT refund claims, often pushed by companies with little to no expertise, is indeed a serious problem in the industry. These agents, operating on a “refund now, check later” basis, exploit gaps in the system and leave property buyers vulnerable. Taxpayers enticed by the promise of easy refunds can find themselves facing HMRC investigations months later, resulting in demands for repayment along with interest and penalties—while the refund agents vanish with their fees.”
adding
“Sadly, this mistrust risks extending to legitimate advisors working to protect purchasers before completion and ensuring they don’t overpay or face issues after funds are paid to HMRC. The irony here is stark: in an effort to catch out those making unfounded claims, legitimate taxpayers are suffering delays and uncertainty.”
An article published on the Law Society website provides further insight and guidance on how conveyancers and property lawyers can best advise clients. Addressing the main issues of concern the piece discusses the legal position, and HMRC guidance in relation to chattels apportionment, properties considered ‘not suitable for use,’ and properties with ‘communal gardens’ and ‘communal facilities’ – where several tribunals have found that a residential property acquired with the right over communal gardens is wholly residential. A series of case studies accompanies the guidance.
Properties considered to be uninhabitable have also been targeted by repayment agents encouraging home owners to submit claims that the property was in such poor condition it should not have been considered a residential property. HMRC guidance says a property must have deteriorated or been damaged to such an extent that it no longer comprises a dwelling, for it to be accepted as non-residential property – and the definition applies to a small minority of buildings.
The First-tier Tribunal (FTT) decision of Mudan [2023] addressed the issue of whether a house, in poor condition but which had been recently occupied, was suitable for use as a dwelling, and residential. Despite an appeal to the Upper Tribunal (Mudan [2024] UKUT 00307) the initial decision was upheld that a property would be residential even if, in its condition at completion, it would have been dangerous to occupy. It did not matter that it was not ready for immediate occupation reaffirming the position there should be a focus on the “fundamental characteristics” and nature of a building over a period of time, rather than a snapshot of habitability at the effective date.
But, says Hannah, it is critical to emphasize that conveyancers and advisors should not rely purely on HMRC guidance but instead look to primary law and case law when dealing with SDLT matters.
“Blindly following guidance can still lead to mistakes, as demonstrated in the BTR Core Fund JPUT v HMRC [2024] case. Here, the taxpayer followed then-applicable guidance for multiple dwellings relief (MDR), yet was unable to reclaim overpaid SDLT when the interpretation shifted. This highlights that, even with good intentions, relying on guidance alone can expose taxpayers to significant risk.”
The advice for practitioners from the Law Society is to ensure the client is aware of their liabilities
“Under ‘pay now, check later’, HMRC can, and does, check claims even after the refund has been made and the agent has received their fee. If the claim is wrong, the taxpayer will be liable to repay the refund plus interest. They may also be charged a penalty calculated in relation to the refund obtained. This can leave buyers in a worse position than if they had not made a refund claim at all.”
adding clients must be aware any return amendment is done as a self-assessment and asking clients to sign a declaration, adapted from the one set out on the land transaction return, would be prudent, providing the example of
“The information given on the attached form of amendment to my land transaction return is correct and complete to the best of my knowledge and belief”.
And for Hannah the key is to be proactive; ‘taxpayers need upfront advice from trusted professionals who critically apply the law, avoiding the need—or temptation—to turn to speculative refund agents down the line.’
