Property Tax August Newsletter

Hi everyone, we hope you’re enjoying the “glorious” summer weather. In this month’s update, we have highlighted some of our recent client cases and further areas of HMRC activity which may be of interest.

As always, if you have any clients who would benefit from property related tax planning, do feel free to reach out to us at propertytax@affinia.co.uk.

Recent wins and new cases 

Alongside a wide range of projects, we are continuing to investigate issues and support needs for clients internally, alongside our other service line colleagues.

Interesting projects include dealing with a £2.8m SDLT relief claim and corporate structuring matter. A second home SDLT surcharge refund that has gone beyond the allowed 3 years and obtaining exceptional treatment from HMRC. Additionally, we’ve been involved in several notable tax cases for both large and small clients.

All in all, over the coming months we hope to be saving our client base from tax costs and risks to the tune of £3.5 million. And that figure will no doubt grow as we roll onto the pre-autumn budget chaos.

Property Tax Team success – penalties avoided in SDLT enquiry

The Property Tax team recently secured a very positive outcome for a client following an SDLT enquiry.

The company had purchased a residential property for £730,000. The original return, filed by the client’s solicitor with input from their accountant (from outside Affinia), applied the standard residential rates of SDLT plus the 3% surcharge, resulting in a tax liability of £45,900. HMRC opened an enquiry and it became clear that the 15% higher rate should have applied (correctly), creating a shortfall of £63,600 in SDLT. Additionally, because the error was prompted, it was likely that HMRC would levy penalties of £10,000–£19,000.

We prepared a robust submission to HMRC which not only confirmed that the higher rate applied, but also carefully supported our client’s position and behaviour. Our submission highlighted the complexity of the rules and the areas where HMRC guidance is unclear or potentially misleading, which likely contributed to the original misunderstanding.

Following this, HMRC agreed not to levy any penalties. Given the scale of the underpayment, this was an excellent result for the client. The outcome demonstrates how specialist input can clarify complex issues, protect clients, and even highlight shortcomings in official guidance.

HMRC news 

SDLT repayment claims under scrutiny

HMRC has recently issued a warning to property buyers about tax agents who promise to reduce Stamp Duty Land Tax (SDLT) liabilities or secure repayment claims by arguing that a property is “uninhabitable” or requires significant renovation, which would trigger application of the lower non-residential SDLT rates.

This follows the case of Mudan & Anor v HMRC, where the Court confirmed that properties in need of repair still attract the residential rates of SDLT, providing the property retains the fundamental characteristics of a dwelling.

HMRC are pursuing both dishonest agents and unsuspecting buyers who have made repayment claims.

If you have any clients who have mentioned that they have recently saved some SDLT on a property that needed a coat of paint, please do let us know and we will be more than happy to review and correct their SDLT position.

HMRC VAT crackdown

You may have spotted that HMRC has been particularly active on VAT fraud cases recently, especially around labour supply and the construction sector. Strictly speaking, this is a VAT issue (so our VAT colleagues are the real experts), but since this is in relation to the construction and property sector, we thought it worth flagging.

At the heart of the issue are fraudulent staffing agencies that supply temporary workers, collect VAT, and then vanish without paying it. These agencies often appear legitimate but leave behind unpaid tax bills and few recoverable assets.

HMRC is shifting its focus to the businesses using these temp workers. Stating that companies can be held responsible for VAT fraud if they “knew or should have known” that their transactions were linked to fraudulent activity, even if they didn’t directly commit the fraud.

In other words, if the only reasonable explanation for a transaction was that it was part of a VAT fraud, HMRC can deny VAT reclaims and pursue the business involved.

So far in 2025, HMRC has listed at least six staffing companies that defaulted on a combined £51 million in unpaid tax. This crackdown means even compliant businesses could be at risk if they don’t do proper due diligence on their suppliers.

That’s about it for this month. We hope you have found our update useful. As mentioned above, if you need any support, we are on hand to help!  Please email propertytax@affinia.co.uk