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Daily Mirror
Daily Mirror
Business
Sam Barker

Stamp duty crackdown coming after HMRC sues house buyers exploiting tax 'loopholes'

The government wants to close down loopholes that mean many homeowners have been paying less stamp duty than they should.

Currently there are several ways homeowners try to bring down their stamp duty, which is a tax paid to the government when you buy property.

One of these is to claim that part of the property or land is used for business, not for residential reasons.

Another is to say part of the land that comes with the house is going to be used for grazing animals, or if a townhouse has a basement that can be let out.

Another way to reduce stamp duty is to buy the house through an offshore company.

These loopholes have led to so-called 'claims farmers' contacting property owners and claiming they can get stamp duty refunds from the taxman - for a fee.

While these claims farmers can win back big stamp duty refunds, HM Revenue & Customs has successfully sued many homeowners who they think have tried it on.

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There are several stamp duty reduction techniques used by claims farmers (Getty Images)

Now HMRC is consulting on ways to close these loopholes down.

Sean Randall, a partner at tax advisers Blick Rothenberg, said:“The consultation was predictable, is designed to stop the abuse of the rules, and put ‘claims farmers’ out of business.

"‘Claims farmers’ are boutiques that send unsolicited letters to home-buyers promising to reclaim overpaid stamp duty in return for a significant fee.

"They argue that part of the purchased property or an outbuilding on the grounds of the property counts as a separate ‘dwelling’ , or that paddocks, usually grazed by sheep on the completion date, do not count as part of the ‘grounds ‘of the house.

"The consultation proposes changes to the stamp duty rules to stop their abuse and ensure they work as intended.”

Randall added that many claims farmers have "acted unscrupulously in pushing arguments that are weak, contrived, and contrary to common sense".

HMRC chief executive Jim Harra said: "As we continue our work to improve the tax system for UK taxpayers and clamp down on avoidance and evasion, we know that an open dialogue with our stakeholders is vital."

Stamp duty is the tax normally paid when buying a home worth more than £125,000. It varies from 0% to 12% depending on the value of the property and whether it is a main home.

First-time buyers pay nothing on homes valued up to £300,000.

The Treasury waived the tax last July to help give buyers a break and keep the property market going during the pandemic.

For a while, anyone buying a house worth up to half a million pounds paid no stamp duty at all in England and Northern Ireland.

That payment holiday was due to end on March 31, but was extended to the end of June in the Budget on March 3 this year.

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