Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q: I live in London. How do I find out if I’ve overpaid previous property tax bills, particularly stamp duty?
“Unfortunately, there isn’t one generic app or website that you can log into [to] confirm whether you have properly paid the correct amount of taxes,” said Elizabeth Small, partner at Forsters law firm in London.
But you can turn to the U.K. government website for lots of good and free information about Stamp Duty Land Tax (SDLT), said Shimon Shaw, senior associate in the Tax Advice team at Veale Wasbrough Vizards LLP in Watford, England, northwest of London.
You also can check your records for the amount of tax paid by reviewing the Stamp Duty Land Tax return or the conveyancer’s completion statement, said James Bromley, an associate at the London law practice of Farrer & Co. There’s even a section on how to apply for a repayment. It’s advisable, though, to consult a tax expert from the start of the home purchase, Ms. Small said.
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This might be obvious, Mr. Bromley said, but keep in mind that “in a residential context, SDLT has historically been the domain of conveyancers with no specialist tax expertise. Many of them will not be well placed to advise on the more complex aspects of the tax.”
Stamp duty, ranging from 0% to 15%, applies to property purchases in the U.K.. If you acquired your property through a solicitor, you probably paid the correct tax, Mr. Shaw said.
However, it’s possible that some buyers may have paid too much if their purchase occurred after April 1, 2016. That’s when an additional 3% tax went into effect for buyers who own other residential properties or who aren’t individuals, such as a company or trustee, Mr. Shaw said.
The circumstances in which a buyer may be entitled to a tax refund, Mr. Bromley said, include when the property consists of more than one suite of living accommodations (for example, a home with a separate apartment annexed to it); when it is used for a commercial purpose; or when the buyer occupies it as their main residence.
Buyers have up to four years to file a claim for refunds. So if you overpaid stamp duty on a property purchased on Dec. 31, 2012, you’d need to file a claim by Dec. 31, 2016. However, the time limit differs if you buy a new home before you sell your existing main residence. As long as you sell your old home within three years of your new home purchase and file a timely return, you’re able to seek a refund of the additional 3% tax, Ms. Small said.
Rather than to act retrospectively—which may involve writing to each branch of Her Majesty’s Revenue and Customs, stating why you think an overpayment was made and providing supporting material—it’s “far better to look carefully at your particular facts and, where appropriate, take advice upfront to ensure that you properly claim all applicable reliefs and exemptions,” Ms. Small said.
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