HMRC has increased enforcement activity around Stamp Duty Land Tax, with a sharp rise in compliance checks into residential property transactions. More homebuyers are now facing retrospective scrutiny of whether the correct amount of stamp duty was paid, often months or years after completion.
The change reflects HMRC’s growing focus on property tax compliance and the increasing complexity of the stamp duty rules.
Stamp duty investigations are rising sharply
HMRC has nearly doubled the number of stamp duty investigations opened in the past year, with thousands of property transactions now under review. These checks typically focus on whether buyers applied the correct SDLT rate and whether any reliefs or refunds were claimed lawfully.
This increase in enforcement has led to a substantial rise in additional tax recovered, with HMRC securing hundreds of millions of pounds in extra SDLT through compliance action.
Why HMRC is focusing on SDLT
Stamp duty is based on self-assessment, meaning buyers declare their own tax position at the point of purchase. HMRC can later review those returns and challenge them if it believes the rules were applied incorrectly.
Several factors are driving the current enforcement approach, including higher stamp duty rates on second homes, complicated rules on replacing a main residence, and a growing number of refund and reclaim claims that HMRC believes are not properly supported by the legislation.
Common issues triggering checks
Many investigations arise from everyday transactions rather than aggressive tax planning. HMRC frequently examines cases involving claims that a property replaced a main residence, properties described as mixed-use, or refunds claimed without sufficient evidence to meet the statutory conditions.
Buyers often rely on advice given quickly during the conveyancing process, without realising that HMRC may revisit the position later.
What happens if HMRC challenges your return
Where HMRC concludes that a stamp duty return was incorrect, it can demand payment of the additional tax due, charge interest backdated to the completion date, and impose financial penalties depending on the nature of the error.
Even where a refund was paid initially, HMRC has the power to recover it in full if it later decides the claim was not valid.
What property buyers should take from this
The key point for taxpayers is that stamp duty errors do not disappear with time. HMRC can and does reopen transactions long after a move has completed.
Anyone buying property, claiming SDLT relief or considering a refund should ensure their position is clearly supported by the rules and evidence, rather than relying on assumptions or marketing claims about easy refunds.
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services Limited - a Marketing & Content Agency for the Professional Services Sector.
