Second home stamp duty refunds running at £10m a month
HM Revenue & Customs is handing back £10m a month to homebuyers who were wrongly charged the second home stamp duty “surcharge”.
Figures released this week show the taxman has returned a total of £185m to more than 15,000 buyers in the 18 months since the introduction of complex new rules designed to slow the buy-to-let market. Since April 2016, anyone buying an additional property is subject to a 3 percentage point surcharge on top of regular stamp duty. But the way the rules are drafted means they draw in those who move from their main home to another new, main home, before the previous one is sold. These people must pay the surcharge, which can make up more than half the overall tax bill, and later claim a refund from the taxman. The process has been criticised as laborious and unnecessary.
Nimesh Shah, a partner at Blick Rothenberg, the accountants, said: “These figures show people are becoming more aware they can claim a refund. The surcharge came in a year-and-a-half ago, so we are getting to that stage in the process. It takes time to get an offer accepted, buy a property and then claim a refund.” But he said it was unfair that buyers were being forced to fork out thousands in tax up front, only to claim it back a matter of weeks later.
The surcharge element can make a huge difference to the bill: a property worth £500,000 is liable for £15,000 stamp duty, but the same property purchased with the surcharge would be liable for twice that at £30,000.
“You don’t want to have to find that extra cash and people could be forced to borrow from family,” Mr Shah added.
Julian Jessop, chief economist at the Institute of Economic Affairs, said the amount paid in refunds was relatively small compared with the total amount of tax bought in. But he said it was a sign of the “complexity” of the system.
In total, HMRC took in a record £2.6bn in residential stamp duty in the past three months, as well as another £900m in non-residential. This is 23pc higher than in the same period last year.
Chancellor Philip Hammond is under pressure to address the stamp duty regime in this month’s Budget. Mr Jessop said: “When you sell your house you end up giving a big chunk on the value to the taxman, so people are more likely to stay put. This tends to mean people stay in bigger houses than they need so it contributes to the housing crisis.”