HMRC SDLT investigations plummet 75%

The number of Stamp Duty Land Tax (SDLT) tax investigations carried out by HMRC has fallen by 75% in the last year, from 2,096 in 2019/20 to 529 in 2020/21, according to new research from private wealth law firm Boodle Hatfield.

The firm said the fall was likely due to HMRC diverting resources away from “traditional” tax compliance work and towards the administration of the furlough scheme during the course of the pandemic.

It added that it is “likely” that HMRC is now starting to examine SDLT returns submitted during the pandemic. As the furlough scheme winds up and HMRC returns to normal working practices, tax investigations are expected to begin to return to pre-pandemic levels soon.

HMRC may reportedly challenge claims by property owners who are not trying to defraud the taxpayer but are uncertain of how the rules apply or legitimately believe they are entitled to relief.

SDLT enquiries may also detect fraud, where individuals deliberately make dishonest or inaccurate disclosures in an attempt to underpay or evade Stamp Duty.

Kyra Motley, partner at Boodle Hatfield, said: “It is an astonishingly sharp drop in SDLT investigations, especially when set against the boom in residential property transactions.”

“It seems unlikely that this drop in investigations means there has been a similarly sharp drop in wrongly claimed SDLT reliefs.

“HMRC will be keen to make up for the shortfall in investigations over the past year. We would expect them to scale up activity now that lockdown restrictions have ended and all the HMRC teams return to a more normal working environment.”