Property investors are actively looking to save money with their next investments thanks to the stamp duty holiday in the UK. But you may have paid too much stamp duty in the past. In this post we will explain how this may have happened and what you can do about it.
Stamp Duty is complex
If you purchase a property in England which is above a specific value then you have to pay stamp duty. This land tax is great for the Treasury as it brings them around £13 billion every year. But some property buyers may be paying too much stamp duty.
Stamp duty is complex as there are many different exceptions and reliefs. The government makes regular changes to stamp duty as well which just adds to the confusion. It is difficult for property investors to keep up with all of the changes.
According to research conducted by Cornerstone Tax Advisors, there is a real lack of clarity around stamp duty and they believe that HMRC need to address this immediately. Cornerstone believe that there is around £3 billion worth of overpaid stamp duty for the 2015/16 tax year. HMRC need to resolve this to prevent buyers paying too much.
Even the most proficient legal professionals find it difficult to navigate stamp duty. Any mistakes made are not intentional with professionals concerned that they do not advise their clients to “underpay”.
Property Investment Stamp Duty
Stamp duty gets even more complicated with property investment. In our opinion, this is an area that overpayment is much more likely. The problem here is that most solicitors are simply unfamiliar with the fine details of stamp duty law. This leads to providing the wrong advice to a number of property investment clients.
Again this is not intentional. There are many different reasons why a property purchaser can overpay stamp duty. It is not always around misunderstanding the surcharge of 3% that property investors have to pay.
Mistrust of the Legal Sector
A study by Cornerstone Tax Advisors revealed that over a third of property purchasers (36%) do not trust their solicitors. They feel that their legal advisors are ripping them off. Another 13% of the study participants said that they felt their solicitor has made errors resulting in them overpaying with stamp duty.
Solicitors have to correctly interpret a number of complexities when calculating what needs to be paid for stamp duty. If their client purchases an additional property then this certainly complicates things. Other intricacies will certainly arise over the purchase of multiple units and the intended use of a property.
A property investor can use the government’s multiple dwellings relief to calculate their stamp duty. With this, stamp duty is calculated using the average price paid for the dwellings rather than on an individual basis.
Stamp Duty Holiday complications
Although the current stamp duty holiday is something that most property investors welcome, it can also create additional problems when it comes to paying stamp duty. The shorter time limits are certainly going to place conveyancers and solicitors under a lot more pressure.
For a solicitor to get this right could mean delays. Calculating stamp duty under pressure is more likely to lead to the calculations being wrong. If you feel that you may have overpaid your stamp duty then consult with an independent tax expert right away.
