"There are currently 49 reliefs and exemptions in the legislation to which individuals, investors and developers are able to exercise if they meet certain criteria."
SDLT is a key area in which to achieve cost savings in the land and property purchasing arena. It’s a necessary evil in any purchase - and with solicitors no longer able to provide advice on SDLT for commercial buyers of land or property, it’s a complex area that can be a minefield to navigate and even more difficult to find expert advisers in.
While solicitors can no longer offer advice, they were often unable to master the complexity of this tax area. Accountants – not being traditional advisers in such matters – are often not aware of the everchanging reliefs and exemptions available, and in most cases, HMRC’s guide calculator will be used. This usually results in the application of a standard calculation for the SDLT rate, as the calculator tool is not designed to provide an accurate calculation and does not take into account the specific circumstances and qualifying features on a site that may qualify for relief. It’s estimated as a result that one in four calculations are incorrect – and in our experience, it’s certainly a prevalent issue.
This is where IFAs can add value and point their clients in the right direction so that they can gain specialist advice on this self-assessed tax to ensure the right advice and guidance is given, and that any ways to legitimately reduce the SDLT liability are exercised.
All too often, the process is undertaken without any due consideration to exemptions that may apply to the case. There’s a simple reason for this: the exemptions are just not within the knowledge pool of the professionals involved in the sale transaction. As a result, the overpayment of SDLT in the UK by thousands of residential and commercial buyers runs into the many millions of pounds.
With little guidance in what is a huge grey area, and usually a time pressure on getting the transaction completed, developers and investors swallow the SDLT fees as part and parcel of the game. However, there are currently 49 reliefs and exemptions in the legislation to which individuals, investors and developers are able to exercise if they meet certain criteria. Quite often this can result in a significant reduction in their stamp duty liability.
Specialist tax consultancy remains a niche area, but as the property investor market ramps up over the coming months, it’s one investors should definitely be thinking about. Getting sound advice and thorough analysis prior to any transaction is key to reducing SDLT liability - we have worked with countless clients for whom we have secured major savings. These include a residential case involving purchase of a £2.15m estate, where we were able to identify numerous qualifying reliefs on the property and surrounding land. This enabled us to reduce the clients liability by £188,752.00 from the higher residential rates calculated using HMRC’s tool, which cited a £221,250.00 bill. The client ended up with a £32,498.00 bill – which is of course much more favourable!
And for those who have made transactions already for which savings could have been applied, a post-completion review of historical property transactions can be executed – going back up to four years – meaning any overpayment can still be clawed back. We worked with a developer for whom we delivered savings of £173,500 post-completion, in a case with an existing office building with plans to transform it into 38 residential apartments and a ground floor pub. Due to the permitted planning and level of works commenced, the site qualified for multiple reliefs. This was submitted to HMRC shortly after completion and the overpayment refunded within the month.
So as the market prepares for heightened activity, IFAs can help buyers capitalise on profits by minimising SDLT liability, by pointing them in the direction of specialist consultancy services that can often save them significant sums of money.
