Multiple Dwellings Relief
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Have you bought a property that has an annex or granny flat?
Then you may have paid too much Stamp Duty Land Tax
With complicated rates and rules, it would be quite easy for you to have done just that….
It’s a simple mistake but if a property has a annex or granny flat then the SDLT calculation should be based upon dividing the sales price by the number of homes purchased, and then calculating the SDLT for each home, as an annexe could qualify as a separate residence. This will be much less than calculating SDLT on the total sum paid, and the overpayment can be quite large. The calculation should reflect “Multiple Dwellings Relief” where the annexe qualifies.
Recently we have come across a number of cases, where homebuyers have paid too much Stamp Duty, Typically, on a house costing £500,000, you may have overpaid £10,000 in Stamp Duty. Wouldn’t you want your money back if this was you?
Buying a residential property can be very stressful, liaising with your solicitor, the estate agents, and also your IFA or mortgage provider, amongst others. You have probably lots of packing to do and de-cluttering, whilst needing to organise your move, yet more often than not, you may be continuing to work up until the last moments. So it is quite easy to see why you will put a lot of trust in the professionals you have engaged.
Changes to the SDLT system
The problem is that over recent years, the Government has made a major overhaul of the Stamp Duty Land Tax (SDLT) system, and the manner in which the tax is applied has become quite complicated. Everything prior to 2016 appeared to be simple, however, there are now anomalies in respect of SDLT, these appear quite often where an annexe or a separate building is involved, or second homes.
Typically, in property transactions involving an annexe or other building, the annexe or other building is valued as part of the total sales price of the property being sold. It can be that the annexe or other building is not even mentioned on the sales particulars so the purchasing solicitor is likely to calculate SDLT based on the single purchase price. Many solicitors are unaware of “Multiple Dwelling Relief”, and this may be one of the reasons why some buyers could have been overcharged.
Your mortgage provider may not have noticed that you were buying more than one property, as long as the valuation stacked up. By contrast from the SDLT perspective, as long as certain criteria is met, then the tax could be apportioned across the house and the annexe or other building separately.
What could you be entitled to?
The net outcome is that you are likely to pay less SDLT by this means. E.g. if the property was valued at £500,000, then a property with an annexe could be taxed as being 2 properties worth £250,000 each. In this example, assuming this is your main residence and no other property is owned, the Stamp Duty for £500,000 is £15,000. Whereas, the Stamp Duty for 2 x £250,000 properties would mean the tax would be £2,500 for each property worth £250,000, total £5,000 for both. This would be a saving of £10,000
Where the higher rate was applied as you already owned another property, the SDLT would double to £30,000. Using the multiple dwellings relief for the new property, the SDLT would be reduced to £10,000 making a saving of £20,000. So how will you know if you have paid too much SDLT? Simply check the SDLT that has been stated on the Completion Statement that your Solicitor gave you, against the Stamp Duty Calculator after dividing the price you paid by the number of properties that you bought. If the property had one annexe then divide by two, if it had two annexes or separate buildings then divide by three, and so on. Then multiply the new SDLT payable by the number of properties (dwellings). The new calculation must not be less than 1% of the original purchase price.
So what can you do?
If you think you have paid too much SDLT, and if the property was bought within the last 12 months we can recover the money for you (subject to certain criteria) from HMRC, however, if you purchased your property more than 12 months ago, then we may have a claim on the indemnity insurance held by your solicitor.
If you would like us to pursue a claim on your behalf under a “no win no fee” agreement or would like more information, then please do not hesitate to contact us. Our fees under such an agreement will be dependent on if the claim is against HMRC or your Solicitor.
Deal with someone you can trust
Lincoln Green can provide you with free expert legal advice and would like to speak to you if you think you have paid too much Stamp Duty Land Tax.
We are a regulated business which is governed by the Solicitors Regulation Authority (SRA). While we manage claims we are not just a claims management company.
When you chose to work with us, we will be able to look after your entire claim from start to finish.
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