HM Revenue & Customs (HMRC) wants to ensure that everyone who pays Stamp Duty Land Tax (SDLT) pays the correct amount and that the system is working effectively. They therefore sometimes make enquiries into returns. These are known as compliance checks.
This guide provides an overview of how compliance checks work for SDLT and explains the circumstances in which an enquiry might be opened into an SDLT return. It also outlines the possible outcomes and tells you what you can do if you don't agree with the result, and provides links to more detailed guidance.
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From 1 April 2010 HMRC has changed the way they carry out compliance checks for SDLT. This brings SDLT into line with other taxes. This is due to new legislation and processes introduced to make the tax system simpler and more consistent.
The changes include:
HMRC doesn’t check all SDLT returns when they are submitted - they accept that most returns are completed accurately and the correct amount of tax calculated and paid. However they do review some returns after they are submitted, to check for accuracy and completeness. The purpose of the check is to:
In addition, a number of transactions are also selected for a compliance check on a random basis - so an enquiry into your transaction may not mean that HMRC thinks there is anything wrong.
Any repayment due or tax owed will be repaid or requested from you at the end of the enquiry.
HMRC can start a compliance check at any time during the nine months following the SDLT filing date - this is 30 days after the effective date of the transaction (normally the completion date). If you send the SDLT return in late, the nine months starts on the date the return is received. After this time HMRC cannot usually start a compliance check unless some new information comes to light.
HMRC will write to you - and your professional adviser if you have one - if they intend to start a compliance check. They will tell you what they need from you and what your rights are.
You'll need to provide any information required within a reasonable time - usually 30 days. If for any reason you can't meet this deadline, let HMRC know why and they will allow you more time if it's reasonable. Any records that you provide will be returned to you. Alternatively, HMRC may be able to agree to examine records at other locations such as your business premises or your solicitor’s office.
During the course of the enquiry you can continue to use the agent named on your SDLT return to deal with HMRC for you. Bear in mind that HMRC can use legal powers to obtain information if you don’t provide it when requested
You need to keep records of each SDLT transaction. This includes any information to do with the transaction such as contracts, conveyances and any maps, plans or other documents. You'll also need to keep information about payments, receipts and details of any financial arrangements.
You should keep your records for a minimum of six years from the effective date of the transaction.
If you do not keep adequate records or you do not keep your records for the required period of time, you may have to pay a penalty.
In some cases HMRC may want to meet you to discuss the transaction and the information you’ve provided. In these circumstances they will tell you in advance what they need to know more about. A professional adviser, friend or relative can accompany you to any meeting.
If a compliance check has already started and you realise that something is wrong or was missed off an SDLT return in error, you can still amend it within 12 months of the filing date. However in this case, if the correction means you are due a repayment this won’t be paid until after the compliance check is completed.
If you are making an amendment because you realise you have underpaid SDLT you should pay the additional amount immediately as interest will be due from the date SDLT was payable.
Find out more about making an amendment to your return
Find out about interest charges on late SDLT payments
How to pay Stamp Duty Land Tax
If a compliance check finds that the return was completed accurately and the correct amount of tax paid, no changes will be made to your return.
If the compliance check finds that you paid more SDLT than was due, HMRC will repay the amount overpaid and pay interest from the date of your payment of SDLT.
If it finds that you haven't paid enough tax - for example, because you claimed a relief that wasn’t due or reclaimed too much tax, or some other reason - HMRC will suggest changes you need to make to the return and why. They will also explain how much you underpaid and how they have reached the calculation.
In this case you’ll have to pay interest on any amount outstanding, so the sooner you make the payment the better.
You may also have to pay a penalty if either of the following applies:
At the end of the enquiry you'll get a letter called a 'closure notice' confirming that the enquiry has finished and what the final result is.
HMRC will ask you to pay any Stamp Duty Land Tax due on an amendment to your SDLT return within 30 days of receiving the closure notice for the amendment. You should pay the tax as soon as possible.
If you send in your amended return later than 30 days after the closure notice but within three months of the 30-day limit, you will automatically be charged a £100 penalty. In all other cases, you will automatically be charged a £200 penalty. If you pay late, you will also have to pay an interest charge.
HMRC only seeks penalties for incorrect returns if SDLT is understated and the error was due to a mistake where you didn’t take reasonable care to make sure it was correct, or if the error was deliberate. These penalties are based on a proportion of the tax understated. When working out any penalty they take into account whether your error was:
How to pay SDLT following a compliance check
You can ask HMRC why they are continuing with a compliance check, if you believe:
They will reconsider the matter to see whether they can agree to end the compliance check. If they can’t they will explain what further information they need.
If you don't think they have any grounds for continuing, you can ask an independent tribunal to consider whether the enquiry should be closed. You can read more detail in our guides under ‘More useful links’ below to find out more.
If you disagree with the compliance check findings you have the right to appeal. You can appeal to an independent tribunal within 30 days of the issue date against:
You can find out how to appeal by reading the notes with the amendment or assessment, or by asking HMRC to explain the process to you.
