Calls for reform after £160m overpaid in stamp duty

The refunds follow a tax squeeze on the buy-to-let sector when the government introduced a 3 per cent stamp duty surcharge on the purchase of additional properties in April 2016, with the aim of cooling the market.

It has led to soaring revenues for HM Revenue & Customs, with stamp duty takings climbing to £2.6bn in the third quarter of 2017.

But Royal London pointed out that people can be inadvertently stung by the tax when a house sale falls through and they are left owning two properties – providing they still own both properties a year after the transaction

I can completely see why delaying the additional 3 per cent for a period would make a lot of sense.Alex Reynolds

Someone buying an average-priced property worth £320,168 in the south east could find themselves having to pay £15,613 in higher rate stamp duty when they were expecting a bill of £6,008.

In the north east, where the average property is worth £130,000, they could find themselves paying £4,000 stamp duty when they were only expecting to pay around £100.

Helen Morrissey, personal finance specialist at Royal London, said: “HMRC’s approach to higher rate second home stamp duty risks causing severe financial hardship for home buyers.

“We need a more common sense approach. It would be far better for the higher rate of stamp duty payment to fall due on the first anniversary of the completion of the purchase. 

“By this point any delays in the sale of a home could be resolved meaning home owners won’t have the stress of finding the extra money. There would also be a massive decrease in the number of refunds HMRC would need to pay out.”

Alex Reynolds, IFA at London-based Advies Private Clients, said the delayed payment was a good idea in theory but would prove hard to implement.

He said: “If a lot of clients are cut out by properties not completing, the issue with that is clearly if you are not expecting to pay it, property chains can collapse as a result of that.

"I can completely see why delaying the additional 3 per cent for a period would make a lot of sense.”

simon.allin@ft.com