Home Property UK pensioners could be owed nearly £6 billion in refunds from HMRC due to being misadvised on Stamp Duty

UK pensioners could be owed nearly £6 billion in refunds from HMRC due to being misadvised on Stamp Duty

by LLP Finance Reporter
17th Oct 23 4:36 pm

New findings from the UK’s leading property tax specialists, Cornerstone Tax, have revealed that in a nationwide exposé, British pension holders could be entitled to nearly £6 billion in stamp duty refunds from HMRC due to being misadvised in relation to the tax.

The revelation comes as owners of commercial property often transfer these into their pensions, and some solicitors and advisors may have advised their clients that stamp duty needed to be paid when it was not due.

As a result, Cornerstone Tax has already successfully assisted 180 affected clients in this area, boasting a 100% success rate, resulting in savings totaling an impressive £5,895,557.00, with an average of £32,753.09 per client.

Concerningly, pension-related transactions have emerged as a prominent source of stamp duty errors, as businesses frequently sell their properties to their pension funds as part of retirement planning.

However, amidst a cost of living crisis when financial security for retirement is vital, Cornerstone has revealed that the error could mean that not only did clients lose capital from their pensions in the initial SDLT payment but also the potential to invest that capital, thereby losing any potential growth in the ensuing years.

For the average error, the value of the claim is therefore calculated at 150% of the tax paid incorrectly (assuming a 7% ROI).

Cornerstone first identified the problem in early 2019 and approached several members of the pensions industry with their concerns.

Advance clearance was also sought from HMRC and obtained; this confirmed that pensions that acquired trade properties from joint owners or owner-managed companies since 2007 and have paid SDLT on these contributions in specie or sales to pension schemes should not have paid SDLT. It is estimated that this has affected between 3,000-5,000 cases a year, meaning 45,000-75,000 cases since 2007.

Those affected could be owed up to £80,000 each, and it has taken over two years and the intervention of former Pensions Minister, Baroness Ros Altmann – who has highlighted the need to look into this matter seriously – for some members of the association to concede that a serious issue exists.

Mr Ajeet Singh Loyal and Amardeep Kaur Loyal receive £18,500 return having been affected by this issue.

Mr Ajeet Singh Loyal and Amardeep Kaur Loyal held a property in a property investment partnership and transferred the property into a connected pension trust scheme. The property was transferred at market value on 4 May 2016 for a consideration of £580,000 and SDLT of £18,500 was paid.

It was identified that since the transaction was a transfer from a partnership to a connected pension trust scheme, the partnership provisions under schedule 15 applied to this transaction. As such, no SDLT was due and no return was required as it was not a notifiable transaction.

A reclaim was submitted by Cornerstone on 22 October 2019, requesting the return to be withdrawn and for the SDLT to be refunded. On 17 January 2020, HMRC responded requesting that an overpayment relief claim should be made, since the transaction took place more than 12 months after the effective date of the transaction. This is despite the fact that we requested for the return to be withdrawn rather than amended. Cornerstone submitted a claim for overpayment relief claim on 29 January 2020 and HMRC subsequently refunded £18,500 (plus £352.77 accrued interest) on 3 March 2020.

Cornerstone Tax commented, “By conducting a thorough analysis, seeking professional advice, and understanding the applicable regulations, you can minimize the risk of overpaying SDLT. However, if an overpayment does occur, initiating a review promptly allows you to rectify the situation, gather evidence, and pursue appropriate actions to claim a refund or make adjustments as required.”

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