A recent Freedom of Information request by a law firm has revealed that SDLT investigations have fallen 75%. In 2019/20, the taxman conducted 2,096 Stamp Duty Land Tax investigations, compared to only 529 in 2020/21.

In many respects, the drop in SDLT investigations is not surprising. During the pandemic, HMRC diverted significant resources into managing the Furlough (CJRS) and SEISS support schemes. At the same time, the stamp duty holiday from July 2020 to June 2021 resulted in fewer transactions qualifying for SDLT.

SDLT investigations to increase?

Now that the government’s COVID-19 support schemes are being wound down, it’s extremely likely that HMRC will switch its focus back onto tax compliance work. One key area of this will be tackling Stamp Duty Land Tax evasion.

Why does HMRC conduct SDLT investigations?

There are lots of reasons HMRC might decide to begin an investigation. Fundamentally, the taxman wants to make sure you have paid the correct tax. Sometimes, people claim reliefs they aren’t entitled to. These include reliefs for mixed-use properties or properties that have an annexe. Correctly claimed, these attract a lower, commercial rate of SDLT.

I bought a property recently. Could I be investigated?

HMRC has a clearly defined timespan during which it can begin an SDLT investigation. Normally it has 9 months from the date you file your tax return. However, if you change your tax return because you have new information, or the original information was misleading, the taxman has longer to begin an investigation.

How do I deal with an SDLT investigation?

Normally HMRC will ask you for information that supports any SDLT relief you have claimed. This can include documents such as contracts, conveyances, maps, plans, receipts and more. If you don’t give HMRC the material it asks for, it can then make a formal request. If you don’t comply with this, you could pay a penalty.

Sometimes HMRC may ask to meet with you to discuss your SDLT transaction. If this happens, it’s a good idea to bring a professional adviser with you.

Can I avoid SDLT investigations?

If you think you’ve made a mistake in reporting SDLT, you can amend your return up to 12 months of the filing date. If you have underpaid, pay the outstanding amount immediately.

It’s also possible to amend your SDLT return if HMRC have started a compliance check. However, if it transpires you’ve actually overpaid stamp duty, you won’t get a repayment until after the investigation has concluded.

What are the penalties for incorrect SDLT returns?

Penalties depend on the reasons why your return was inaccurate. HMRC will take a harsher view of what it believes to be a fraudulent return, rather than one that was carelessly submitted. It’s also a good idea to co-operate with HMRC at all times to keep penalties as low as possible.

There are also fixed penalties for late amended returns. If you submit your amended return between 14 days and 3 months after receiving a closure notice, you’ll pay £100. In other cases, you’ll pay a £200 penalty. Interest is also added to late payments.

HMRC wants to investigate my SDLT return. Can you help?

 Yes, if you are a THP client we can help you with any SDLT investigation. Indeed, we work closely with buy-to-let landlords on a daily basis. However, we strongly recommend consulting us about any transaction involving stamp duty – we will help make sure your return is submitted accurately and might even be able to save you some money!

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About Jon Pryse-Jones

Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.

An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”

Jon’s appreciation for THP extends to his fellow team members and the board.  “They really know how to run a successful business,” he says.  He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.

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