Stamp duty investigations plummet by three quarters - Boodle Hatfield

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11 Aug 2021

Stamp duty investigations plummet by three quarters

HMRC will ramp up fraud crackdown once crisis support schemes end, experts warn

Stamp duty investigations fell dramatically last year, however experts have warned the taxman will make up for lost time once the furlough scheme ends in September.

HM Revenue & Customs launched 75pc fewer stamp duty tax investigations in 2020-21, reviewing only 529 cases vs 2,096 in 2019-20, the lowest figure recorded in five years, according to a Freedom of Information request from law firm Boodle Hatfield.

The fall came despite property transactions having soared since the housing market reopened last summer.

The stamp duty holiday would have meant fewer buyers needed to pay the tax and HMRC said this had a knock-on-effect on compliance checks. However, the house price growth has pushed 1.8 million homes into a higher stamp duty bracket. Some 940,000 properties fell into the 5pc stamp duty band while an extra 130,000 buyers into the 10pc band, according to analysis by property website Zoopla.

There will be more than 1.5 million property sales this year as buyers remain on the hunt for more space following lockdowns.

Kyra Motley, of Boodle Hatfield, said the drop in investigations was also down to resources being redirected to the furlough scheme throughout the pandemic, instead of traditional tax compliance.

“It is an astonishingly sharp drop, especially when set against the boom in residential property transactions. It seems unlikely this fall in investigations is because there has been a similarly sharp drop in wrongly claimed tax reliefs,” she added.

“HMRC will be keen to make up for the shortfall and we expect them to scale up now that lockdown restrictions have ended and staff have returned to a more normal working environment,” she said.

Compliance checks are used to uncover fraud where a buyer has deliberately attempted to avoid paying stamp duty. However, HMRC will also challenge the use of stamp duty relief on certain transactions.

Buyers can reduce their tax bill, for example, if the property is mixed-use and qualifies for the lower commercial rate of stamp duty. Home buyers have 14 days post completion to pay tax due on property or land. However, HMRC has nine months from the date a return is filed to begin a compliance check.

An HMRC spokesperson said: “Throughout the pandemic, HMRC’s priority has been to deliver support to protect people’s livelihoods and support businesses. We have prioritised tackling serious fraud and criminal attacks on the tax system, while continuing wider activity to make sure individuals and businesses pay the right tax.”

The stamp duty holiday, introduced in July 2020, temporarily increased the nil-rate tax band to £500,000, meaning buyers in England and Northern Ireland saved up to £15,000 if they completed their sales by June 30 this year. The tax break has now been tapered to £250,000 until September 30, and will return to £125,000 from October.

This article was first published in The Telegraph on 11th August 2021. Read the full press release here.