Why HMRC’s Stamp Duty Calculator isn’t always Correct

Posted 07th January 2022 by ctatax-admin

HMRC’s function is to collect taxes, among other things, so you’d think that a calculator provided by them to work out how much of a particular tax was payable would be fairly reliable, right? Here’s why HMRC’s Stamp Duty calculator is now always correct… 

It doesn’t help that for starters, the calculator doesn’t ask all the questions which might be pertinent to the final Stamp Duty figure. Since it’s inception in 2003, replacing the old Stamp Duty. Stamp Duty Land Tax (or SDLT) has acquired upwards of 40 different exemptions, exceptions and reliefs as it has gone on to become perhaps the most regularly altered and complex tax on the U.K. statute books.

Designed to be easy to use, the calculator asks a fairly perfunctory set of questions regarding the status of a purchase property – whether it is freehold or leasehold, a residential or commercial property, and what the purchase price and date are. While these are certainly pertinent factors to the final SDLT figure, they are far from the only ones to consider.

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Additional factors which are relevant include the physical makeup of the property – does it have an additional ‘dwelling’ as part of it, like a ‘granny flat’ or land which extends beyond the garden? Does it have a ‘mixed use’ being part residential (such as a flat above a shop). How is it being purchased? Is it a Buy To Let Investment purchase or a simple residential transaction? Is it being purchased for cash?

Many, many factors may therefore be relevant in determining the SDLT due, by virtue of the various reliefs and exemptions they may trigger – Multiple Dwellings Relief, Mixed Use Relief and so on – as well as the additional charges which may be incurred such as the Higher Rate on Additional Dwellings, also known as the 3% ‘surcharge’, levied against BTL purchases in an attempt to discourage investment buying and free up smaller properties for first time buyers.

But your solicitor deals with SDLT on your purchase, much like everything else – surely they will have access to a deeper, more complete calculator? 

In fact, no, your solicitor will have used the self-same calculator you, as a member of the public, have access to. Small wonder then, that so many instances crop up of the incorrect SDLT having been paid on a property, evidenced in the thousands of claims against law firms currently being made for missed Multiple Dwellings Relief, or the guidance issued by the law society in 2019 for their Conveyancing Quality Scheme which stated that firms must start obtaining full audit trails of how they had arrived at the SDLT figure for their files.

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Perhaps most damning of all is the admission by HMRC to the Times in 2018 that the calculator was intended not as a final figure generator but merely ‘a guide’. Add to this the pressure caused on conveyancers by additional factors like the recent Stamp Duty ‘holiday’ and the fact that HMRC helpline staff themselves often aren’t fully versed in the nuances of SDLT and you have a recipe for consistent incorrectness.