Enquiries under stamp duty land tax

How settlements are negotiated

Contents

Introduction

When we start an enquiry, it does not mean that we think you have done anything wrong. We check some land transaction returns to make sure they are right or if we need further information to understand the figures. We also randomly select land transaction returns for enquiry to ensure the system is operating fairly.

If nothing is wrong

If nothing is wrong, we will not make any amendments to your land transaction return.

If something is wrong

Generally, if our enquiry reveals that you have made an innocent error, we will

  • tell you in writing that we have completed our enquiries, and
  • amend your land transaction return to show the correct details.

We may charge interest on any additional tax that may be due.

You may also be liable to a penalty if our enquiry reveals that as a result of fraudulent or negligent conduct, you have

  • paid too little tax
  • reclaimed too much tax
  • claimed a stamp duty land tax relief that was not due, or
  • paid the tax late.

We can use formal procedures to close the enquiry and amend your land transaction return to bring the additional tax into charge. We charge interest on any additional tax that may be due, or on any penalty that we formally determine.

However, where penalties are involved, we will probably ask you to make an offer to pay an amount including the additional tax, interest and penalties to settle the sum due. This leaflet describes the procedures involved.

Do I have to co-operate with your enquiry?

We would welcome your co-operation with our enquiry and in establishing the correct stamp duty land tax. The extent to which you co-operate with us and provide us with the information is entirely a matter for you. However, in making your decision, you may wish to get help from a professional adviser. If you do, your adviser can accompany you to any meeting held with us. He or she may correspond with us on your behalf.

We make notes of all meetings and give copies of the notes to you or your adviser if you ask for them.

In calculating the amount of any penalty, we will take into account the extent to which you have been helpful and freely and fully volunteered any information about your land transaction, which were omitted or wrongly stated.

What happens first?

When we are ready to close our enquiries we will write to you, or ask you and your professional adviser, if you have one, to attend a meeting with us.

We will tell you

  • what we have found or decided
  • the amount of additional tax you may owe, and
  • the interest that may be due up to the anticipated payment date.

We will listen to any explanations you or your professional adviser give. We will then tell you the maximum amount of penalties we think could be determined under formal procedures.

Finally, we will explain that it is normal to ask someone in your position to offer to pay one sum for tax, interest and penalties. We will then ask if you are prepared to make such an offer.

How do you work out the figure you think I should offer?

We add together the additional tax, the interest on that tax and an amount for penalties. We calculate interest from the date the tax should have been paid up to the date you actually paid or will pay it.

How do you work out penalties?

The penalty figure will normally be a percentage of the additional tax. This additional tax is where you have

  • paid too little tax
  • reclaimed too much tax
  • claimed a stamp duty land tax relief that was not due, or
  • paid the tax late.

In law it could be 100 per cent of that amount, but in practice it is always less than that in a negotiated settlement.

We start with a penalty figure of 100 per cent and reduce it by an amount, which depends on

  • whether you disclose all the details of the transaction
  • how well you co-operate over the whole period of the enquiry, and
  • the seriousness of the offence.

Disclosure - A reduction of up to 20 per cent (30 per cent for a full voluntary disclosure where there was no fear of early discovery by us).

If you make a full disclosure at the time we first open the enquiry, you will get a considerable reduction in the amount of the penalty.

If you deny until the last possible moment that anything is wrong, you will get little or no reduction for disclosure.

Between these two extremes, a wide variety of circumstances is possible. We will consider how much information you gave, how quickly and how that contributed towards settling the enquiry.

Co-operation - A reduction of up to 40 per cent.

If you supply information quickly, attend interviews, answer questions honestly and accurately, give all relevant facts and pay any additional tax on account when it becomes possible to estimate the amount due, you will then get the maximum reduction for co operation.

If you put off supplying information, give misleading answers to questions, do nothing until we take formal action against you and generally obstruct the progress of the enquiry you will not get any reduction.

Between these extremes, there is a wide range of possible circumstances and we will look at how well you have co-operated with the enquiry.

Seriousness - A reduction of up to 40 per cent.

Your actions may amount to a premeditated and well-organised fraud or something much less serious. We will take into account what you did, how you did it, how long it went on and the amount of money involved. The less serious the offence the bigger the reduction in the penalty.

How does this all work in practice?

If, for example, we think that the reduction for disclosure is 15 per cent, for co-operation 30 per cent and for seriousness 20 per cent, the total reduction will be 65 per cent, making the expected penalty 35 per cent(100 per cent - 65 per cent). The calculation of what we think you should offer might look like this.

 
Description Amount (£)
Additional stamp duty land tax
10,337
Interest
4,195
Penalty at 35 per cent
3,618
Total Offer
18,150

How can I negotiate the offer?

We will have already agreed the figures for tax and interest, leaving only the penalty to be negotiated.

You will have an opportunity to draw our attention to any matters affecting the penalty figure, which you think we have not given enough weight to. We will consider the effect of these on the figure we had in mind, and will comment on any figure you might suggest. As a result, we might be able to reach an agreement either straight away or after a few days consideration.

What happens next?

If you agree to make an offer, you have to sign a formal letter offering to pay the agreed sum within a stated period and send this offer to us. If we are happy with it, we will issue a letter of acceptance.

The exchange of letters amounts to a legal contract between us and we are both bound by its legal terms. If you pay under the terms of the contract, we cannot use formal proceedings to recover the tax, interest or penalties. For this reason, we make sure that the terms of the letter are precise.

When we send the acceptance letter we will include instructions on how to pay. When you pay the amount under the terms of the contract, the matter will be at an end. If you do not keep to the terms of the contract, we will charge interest on late payments and we may take Court action to recover the amount outstanding.

We will not take advantage of the fact that a formal closure notice has not been issued. If any additional liabilities relating to the enquiry come to light at any time after we have accepted your offer, we will not under any circumstances amend your assessment. But we will arrange to recover any such liabilities.

What if I cannot pay?

If you agree the amount to be paid, but cannot pay the full amount straight away, it may be possible to arrange payment by instalments. We will expect you to make as large a down payment as you can and to pay the rest, including an amount for extra interest, by agreed instalments over as short a period as possible.

What if I do not make an offer?

If you do not want to make an offer or you make one we cannot accept, we will regard this as the end of negotiations (unless you seek to reopen them). We will then proceed as follows.

Tax

We will issue a notice of closure for each land transaction return that has an open enquiry, which will explain

  • that our enquiries have finished
  • what our conclusions are, and
  • the amendments we are making.

We will issue assessments for other land transaction returns involved.

Interest

The notice of closure will show the interest charged on the date it is issued. Interest will continue to run until the date the tax is paid.

Penalties

We can determine the amount of penalties that we think should be imposed.

Appeals

You have a right to appeal against our conclusions or amendments and against any penalties. Details of the appeal procedures are in the Department for Constitutional Affairs leaflet 'Tax Appeals. A guide to appealing against decisions of HMRC on tax and other matters'.

We may use the information or documents you provided during the enquiry in any appeal proceedings.

Can I still negotiate after formal action has started?

Yes. If you want to make an offer you can reopen negotiations with us at any time before the penalties become final and conclusive.

What can I do if I am unhappy about the way the enquiry is being handled?

If, at any time during the enquiry, you are dissatisfied with the way we are handling it, or you think that it should end, you can ask the Appeal Commissioners to consider whether the enquiry should be closed. This and the full complaints procedure is explained in COP24 ‘Stamp Duty Land Tax enquiries’ and COP25 ‘Stamp Duty Land Tax. Enquiries into companies and partnerships’.

Help and advice

This leaflet may not answer every question you have. If you require any further advice

Customer Service

Service Standards

We set ourselves standards of service. Every year we check to see how we have done and we publish the results. If you would like details, please:

  • contact us. You will find us in the Phone Book under ‘Inland Revenue’ (although this is likely to change to HMRC).

Putting things right

If we do not live up to your expectations, please let the person dealing with your case know what is wrong. We will work as quickly as possible to settle your complaint. We would not expect a complaint to get beyond this stage. But if you are still unhappy, please ask for your complaint to be referred to the Customer Relations Manager. Please see our factsheet C/FS 'Complaints and putting things right’.

Customers with particular needs

We offer a range of facilities for customers with particular needs.

Further information

Other leaflets

Copies of our leaflets are available

  • online leaflets
  • by phoning the Stamp Taxes Orderline
  • from HM Revenue & Customs Enquiry Centres. You will find the address
    • in the Phone Book under ‘Inland Revenue’, (although this is likely to change to HMRC)
    • by visiting the Local Offices page of this website