Stamp Duty Refunds

Thousands of homeowners, unable to sell because of the covid-19 lockdown, are in danger of breaching the 3-year stamp duty concession ruling when they have bought a second home before selling their existing home.

Anyone owning two homes simply because they bought a new one, but did not yet sell the old home, will have to pay a stamp duty land tax (SDLT) surcharge. Since 1st April 2016 second homes have been subject to a three per cent stamp duty surcharge, but had they sold their old home within three years, the three per cent would be refunded.

Stamp duty (SDLT) is a tax paid by homebuyers when they purchase property or land. The tax is banded so that currently no tax is levied on properties worth less than £125,000, but they would pay £7,500 on a property worth £350,000 and £43,750 on a property worth £1million etc.

(Do not reply totally on the information provided here – in all cases seek professional advice before making or not making decisions)

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In view of the problems thousands of homeowners have had selling properties, because of the restrictions imposed by the coronavirus lockdown, the government has now extended the three-year period in which owners have to sell their previous home to get the SDLT refund.

The government has recognised the impact of coronavirus on the house market, creating great difficulty in viewing properties and achieving sales completions. Many mortgage offers have fallen through because of people’s reduced income, and it has meant that there have been genuine reasons for delays beyond this original time period allowed.

HM Revenue & Customs (HMRC) is therefore amending its guidance this week on SDLT payments, giving examples of exceptional circumstances where sellers may be able to apply for a refund of stamp duty.

HMRC has said:

“You may still be able to apply for a refund, if you purchased your new home on or after 1 January 2017 and were unable to sell your previous home within three years. To be able to get the refund, the delay in selling must be because of reasons outside of your control. These may be, but are not limited to, the impact of coronavirus (Covid-19) preventing the sale.”

Laura Suter from the wealth manager AJ Bell told The Sunday Times:

“It’s sensible that the government has given these homeowners some breathing space to sell their home and get their stamp duty refunds. The change applies to anyone who hit the three-year mark from January this year onwards.”

Deferring Self Assessment tax payments on account due to coronavirus.

Taxpayers have the option to defer their second payment on account if they are:

1 – registered in the UK for Self Assessment and finding it difficult to make a second payment on account by 31 July 2020, due to the impact of coronavirus.

2 – Can still make the payment by 31 July 2020 as normal.

HMRC has said that providing this criteria is met, it will not charge interest or apply any penalties on any amount of the deferred payment on account, provided it’s paid on or before 31 January 2021.

Taxpayers will still need to submit a Self Assessment tax return to HMRC on time and if they choose to defer they will need to inform HMRC about their choice in advance.

Choosing to defer will not prevent taxpayers from being entitled to other coronavirus support that HMRC provides, but the second payment on account must be made on or before 31 January 2021 and any other payments that may be due by this date, including for example:

– balancing payment due for the 2019 to 2020 tax year

– first payment on account due for the 2020 to 2021 tax year

Taxpayers can check payments that are due towards their next tax bill by signing in to their online account.

VAT deferrals:

Businesses that missed their VAT deferral deadline may be able to claim a refund when they failed to cancel their Direct Debit in time to can claim a refund. HMRC has confirmed that where business taxpayers wanted to defer VAT payments due between 20 March 2020 and 30 June 2020, but did not manage to cancel their Direct Debit in time can claim a refund.

The quickest way for them to do so, according to HMRC, is to submit a Direct Debit Indemnity Claim to their bank, ensuring that they state they want to claim a refund under the Direct Debit Indemnity Scheme (DDI).

HMRC is to provide further guidance on the payment of the deferred amount at the end of the deferral period. Businesses will also need to make arrangements to pay VAT falling due from 1 July 2020 to 31 March 2021 (i.e., amounts that are not deferred). HMRC has not yet confirmed that reinstating a Direct Debit will not result in the deferred VAT being collected immediately.

Coronavirus job retention scheme update over-claim errors

Where an error in a claim made to HMRC has resulted in an over-claimed amount, this must be repaid this back to HMRC. However, the over-claimed amount can now be adjusted as part of the businesses next claim. HMRC will ask, when the business makes its next claim, whether an adjustment to the amount is needed to take account of a previous error. Therefore the new claim amount will be reduced to reflect this. No further action should be needed, but careful records must be kept of this adjustment for six years.

If an error in a claim was made with no plans to submit further claims, HMRC is working on a process that will allow businesses to inform them about the error and will pay back any amounts that you have over-claimed. Updated guidance will be available soon.

VAT reverse charge on construction services

HMRC has announced a five-month delay to the introduction of the domestic reverse charge for construction services, due to the impact of the coronavirus pandemic on the construction sector, and the VAT change will not now apply until 1 March 2021.

The new rules mark a complete overhaul of the way VAT is payable on building and construction invoices, as part of moves to reduce fraud in the sector. Under the domestic reverse charge the customer receiving the service will have to pay the VAT owed straight to HMRC instead of paying the supplier if they report under the Construction Industry Scheme (CIS).

The change was originally scheduled to come into effect from 1 October 2019, but was then deferred for 12 months, after industry bodies and accounting specialists highlighted concerns about lack of preparation and the impact on businesses.

The start date has now been put back from 1 October 2020 to 1 March 2021.

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