Homebuyers are being warned they could end up thousands of pounds out of pocket as HMRC launches a major crackdown on dishonest tax agents making bogus Stamp Duty Land Tax (SDLT) repayment claims.
The alert follows a landmark Court of Appeal ruling which confirmed that homes in need of repair are still classed as residential for tax purposes – blowing apart claims by some agents that buyers can claw back cash on the basis a property was “uninhabitable”. The ruling – in the case of Mudan & Anor v HMRC – is seen as a major victory for the taxman and a blow to rogue advisers who target recent buyers with misleading ‘no win, no fee’ refund offers.
Anthony Burke, deputy director of compliance assets at HMRC, said: “The Court of Appeal’s decision is a major win, protecting public funds. Homebuyers should be cautious of allowing someone to make a Stamp Duty Land Tax repayment claim on their behalf.
“If the claim is inaccurate, you could end up paying more than the amount you were trying to recover.”
The warning comes amid a rise in marketing letters and adverts falsely promising SDLT refunds where a home requires refurbishment – even minor works such as replastering, rewiring or a new boiler. In many cases, buyers hand over their details to agents, who pocket huge fees – sometimes up to 30 per cent of the refund – only for HMRC to later reverse the repayment, leaving the homeowner liable for the full tax bill, plus interest and penalties.
In one example, a man identified only as Joe bought a house in London for £1.1million. His solicitor correctly filed an SDLT return at the residential rate – £53,750 – but because the home needed modernisation, Joe was later contacted by a claims firm offering to reclaim part of that.
The firm said they could get him £9,250 back on the basis the property was effectively non-residential due to disrepair. Joe agreed, and received £6,475 after the agent’s 30 per cent cut. But months later, HMRC investigated and ruled the property clearly fell within residential rules.
Joe now owes the full £9,250 plus interest and penalties, and the agent has vanished – ignoring emails and calls.
HMRC said it is now actively using civil and criminal powers to pursue agents abusing the SDLT system. The department reiterated that SDLT is a self-assessed tax, meaning the legal responsibility lies with the buyer – even when they use a third-party agent.
The ruling backed HMRC’s position that, unless a building has lost the fundamental characteristics of a dwelling – such as being structurally unsound – it remains residential even if it needs work. Past use as a home is also a key factor. The judges concluded that “being suitable for use as a dwelling does not mean the same thing as ready for immediate occupation”, adding that “the ordinary speaker of English” would still describe such homes as residential property.
In the Mudan case, the buyers were advised by a tax agent to claim an SDLT refund on a dilapidated property purchased in 2019. HMRC rejected the claim and the court upheld the decision, confirming that the refund was not due.
HMRC has encouraged homebuyers to steer clear of third-party claim firms and instead use the official SDLT guidance on GOV.UK. A spokesperson added: “Where a claim is due, it can be made directly by the customer at no cost.”
