Investigations into real estate transactions have increased by 88% as a result of the HMRC stamp duty crackdown Here are some warning signs

HMRC is increasing its scrutiny of stamp duty land tax reporting, from false claims of stamp duty refunds to deceiving the taxman about property ownership

Here's how.

Property buyers are being urged to ensure they declare and pay the correct stamp duty or face potentially thousands of pounds in fines as HMRC almost doubles its investigations into property transactions.

According to a Freedom of Information request made to HMRC by accountants and business advisors Lubbock Fine, stamp duty land tax (SDLT) investigations increased by 88% in the 12 months ending April 5, 2025, from 1,617 to 3,035.

An additional 200 million in taxes were recovered as a result of the crackdown, a 135% increase from 85 million in 2023 - 2024.

A representative for HMRC told BFIA that the rise is primarily the result of heightened scrutiny of "rogue repayment agents offering to make SDLT repayment claims" for homebuyers.

"People might end up paying more than the amount they were trying to recover if a claim is inaccurate," they stated.

Why are more people looking into stamp duty?

Following the October 2024 Budget's increase in the additional SDLT rate for second properties from 3 percent to 5 percent, HMRC appears to have stepped up its scrutiny of real estate transactions.

The increase has made it more financially advantageous for buyers of a second property to deceive HMRC and say they don't own another property. HMRC is thought to be aware of this, which may also result in additional investigations.

According to Lubbock Fine, another reason why more people are making mistakes when filing their taxes is the increased complexity of the SDLT regime, which raises the possibility of an HMRC investigation.

Lubbock Fine cautions that people should consult a professional to avoid making expensive mistakes because the penalties can amount to tens of thousands of pounds.

"People are far more likely to make mistakes because SDLT rules are becoming more complex and constantly changing," stated Graham Caddock, director at Lubbock Fine. Errors can be very costly.

HMRC is anticipated to conduct more investigations as a result of the public outcry surrounding Angela Rayner's underpayment of SDLT.

Caddock stated: "HMRC is likely to increase its scrutiny on second property acquisitions following the recent public attention surrounding the Angela Rayner case. A "

Rayner, the former housing secretary and deputy prime minister, was forced to resign after it was discovered that she had underpaid stamp duty on her 800,000-seaside apartment.

Why would HMRC look into claims involving stamp duty?

HMRC would investigate stamp duty transactions if it was suspicious the property buying and selling activities didnt match up and so the correct tax hadnt been paid.

According to Lubbock Fine, some HMRC investigations have involved:

In order to avoid paying the SDLT surcharge when buying additional properties, buyers fabricate claims that they are replacing their primary residence. Buyers transferring their home into a trust or to their partner before buying another property, which HMRC does not treat as valid grounds for avoiding the surcharge. "HMRC looks at many different factors to decide what counts as your main residence," Caddock stated. Whether a property has been transferred into a trust or a partner doesnt necessarily carry much weight with HMRC.

According to Lubbock Fine, a lot of stamp duty investigations involve buyers mistakenly believing that a property with some commercial use, like self-contained rental apartments, qualifies for a lower stamp duty charge. However, that is only true in very limited circumstances.

For the property to be eligible, the commercial portions must be distinct, inappropriate for everyday living, and still in operation at the time of purchase.

"Many people mistakenly believe that a house can claim a lower SDLT if it has some commercial use," Caddock stated. However, HMRC is likely to contest that status if the property is still obviously suitable for habitation or if the commercial portion isn't properly segregated.

In a similar vein, HMRC is likely to assert that the property's commercial component is fake and was created only to benefit from taxes if it was added recently. People may wind up paying hefty fines for that.

Bogus requests for refunds of stamp duty.

The taxman has also been cracking down on what it describes as bogus claims for stamp duty refunds. This occurs when a buyer argues that a property is not a residential home because it requires repairs and cannot be inhabited.

In the event that a property they have purchased requires repairs, HMRC is cautioning buyers to be wary of tax agents who offer to secure stamp duty repayments on their behalf.

The taxman said it is "taking decisive action on spurious SDLT repayment claims", using civil and criminal powers to deal with the minority who undermine the tax system.

According to HMRC, some tax agents have proposed that they can recover SDLT that the buyer has already paid for a fee by claiming that the property is non-residential because it is uninhabitable.

But making claims of this kind often leave the homeowner liable for the full amount of stamp duty, plus penalties and interest.

A recent Court of Appeal judgment in the case of Mudan and Anor v HMRC has confirmed that housing ("dwellings") in need of repair are chargeable at the residential rates of SDLT, and that repayment claims based solely on a propertys condition are not valid.

This ruling upholds HMRC's long-held belief that a property is still suitable for use as a dwelling and attracts residential rates of SDLT if it needs repairs but still has the essential features of a dwelling. A key factor in determining suitability is whether a property had been previously used as a dwelling.

"The Court of Appeals ruling is a significant victory, safeguarding public funds," stated Anthony Burke, HMRC's deputy director of compliance assets. When letting someone file a stamp duty land tax repayment claim on their behalf, homebuyers should exercise caution.

"If the claim is inaccurate, you could end up paying more than the amount you were trying to recover. A "