Recently, HM Revenue and Customs (HMRC) also warned home buyers of the rising level of stamp duty refund frauds against property buyers. Buyers are being contacted by fraudulent agents who falsely claim that homes in need of repair are non-residential property, which, it is claimed, qualifies them to a refund of excessively paid Stamp Duty Land Tax (SDLT). These advertisements tend to sound reasonable as they promise large refunds at a fee, at times on no win, no fee basis. The HMRC however emphasizes that such claims on refund, particularly where the homeowner in the case of his property has depended on the state in which the property is found to be falling down, is invalid and may cost the homeowner in a serious way financially.
Stamp Duty Refund Scam Indicators
| Indicator | Explanation |
|---|---|
| Unsolicited contact | Receiving unexpected calls or letters promising refunds |
| Claims based on repairs | Refund claims solely due to property needing repairs or modernisation |
| “No win, no fee” offers | Agents charging fees only if a refund is received, often misleading |
| Pressure to act quickly | Urgent requests to sign contracts or pay fees |
| Lack of official HMRC involvement | No verified communication via official HMRC channels |
The Legal Environment and the recent court decision.
This alert comes after a ground breaking decision by the Court of Appeal establishing that residential properties, including those that require repairs, qualify to pay residential SDLT rates. The decision (Mudan and Anor v HMRC) underlined that repairs do not make any difference in transforming the property into a residential or non- residential property. Refund claims based purely on the condition of property, that it is non-residential or uninhabitable to reduce SDLT rates, are therefore not valid. Homebuyers who succumb to these frauds can be liable to pay the full amount of SDLT, fines and interests, and they may not receive any of the compensation, usually without the involvement of the fraudulent agents who took receipts of the fake claims
The impact of the Scam on Homebuyers.
Such scams usually start by agents locating new purchasers, using property records, and sending unsolicited invitations to review SDLT payments. Victims are tempted with the claims of refund of thousands of pounds. As an example, a buyer can be informed that their house, because of its repairs such as damp proofing or rewiring, can have a refund based on non-residential rates. The buyer may be refunded part of the fee, after paying an agent, but this is normally checked by the HMRC which declines the claim in the future. Here, the unpaid tax value plus other interest payments and penalties are sought against the homebuyer resulting in a huge loss of money.
How to Safeguard Yourself against Stamp Tax Refund Scams.
HMRC encourages buyers to be cautious and not to deal with suspicious tax agents who promise them a refund guarantee. The best way out would be to seek the advice of original conveyancer or a reputable tax expert before claiming any refund. Customers should only ever use official channels of HMRC, when making a query or claim and should not give out personal or financial information to unsolicited callers or email-mail. The official guidance and the helplines of HMRC are the most suitable to check any communication related to the refund. The knowledge and vigilance are the most important components of prevention of these expensive frauds.
FAQs
Q1: Am I entitled to claim a refund of stamp duty on the basis that my property is in need of repairs?
No.Properties that require some repair are still levied SDLT rates. The assertions on the basis of repair only are not acceptable and can result in punishment[2].
Q2: What can I do to ensure that the claim of a refund of stamp duty is valid?
You should never make a refund claim without checking HMRC directly via their official site or by calling your conveyancer.
Q3: What do I do in case I fall prey to stamp duty refund scam?
You will become liable to pay more SDLT, interests and penalties. HMRC is not only vigorously targeting fraudulent agents but people are also liable when false claims are made on behalf of those agents.
This HMRC alert is an important reminder to the homebuyers to be vigilant and knowledgeable when contacted by the stamp duty refunds. These scams can best be prevented by sound professional advice and recourse to the official sources.
