What triggers an HMRC SDLT enquiry?

Common enquiry triggers include mixed-use property classifications, MDR claims, claims for the replacement of main residence exemption, first-time buyer's relief claims, and transactions involving connected parties or trusts. HMRC uses risk-based criteria to select SDLT returns for enquiry. The most common triggers are: (1) mixed-use property claims — HMRC scrutinises whether the non-residential element is genuine; (2) MDR claims — HMRC checks whether the dwellings are genuinely separate; (3) replacement of main residence — HMRC verifies that the previous property was actually the main residence; (4) first-time buyer's relief — HMRC checks that neither buyer has previously owned property; (5) connected party and trust transactions — HMRC checks the market value rule has been applied. Returns with unusual features or large SDLT savings are more likely to be selected. Relevant legislation: Schedule 10 Finance Act 2003, Paragraph 12. Example: A buyer claims mixed-use treatment on a property with a small commercial element, saving £50,000 in SDLT. HMRC opens an enquiry, requesting evidence of the commercial use. The buyer must provide evidence such as tenancy agreements, business rates records, and photographs. Common mistake: Claiming an SDLT relief without keeping proper documentation to support the claim. Without evidence, the claim may fail under enquiry.

What is a discovery assessment for SDLT?

A discovery assessment is HMRC's power to raise SDLT after the enquiry window has closed, if they discover that SDLT has been underpaid. Time limits are 4 years (innocent), 6 years (careless), or 20 years (deliberate/fraud). If HMRC discovers that SDLT has been underpaid after the 12-month enquiry window has closed, they can issue a discovery assessment. The time limits are: four years from the end of the tax year if the underpayment was due to an innocent error by the taxpayer; six years if the taxpayer was careless; and 20 years if the underpayment was due to deliberate behaviour or fraud. Discovery assessments are a powerful tool, and HMRC must meet specific conditions to issue one: they must have discovered the underpayment, and they must not have been able to discover it through reasonable diligence during the enquiry window. Relevant legislation: Schedule 10 Finance Act 2003, Paragraph 20 (discovery assessments). Example: A buyer claimed mixed-use treatment on a property in 2021. HMRC did not open an enquiry within 12 months. In 2024, HMRC discovers that the commercial element was not genuine and issues a discovery assessment. If the error was innocent, HMRC can go back four years; if careless, six years; if deliberate, 20 years. Common mistake: Assuming that if no enquiry was opened, the SDLT position is final. Discovery assessments can be raised years after the transaction.

What should I do if I receive an HMRC SDLT enquiry notice?

Seek specialist SDLT advice immediately. Do not respond to HMRC without professional representation. A specialist adviser can handle all communications and work towards the best outcome. If you receive an HMRC enquiry notice, the most important step is to seek specialist advice immediately. Do not respond to HMRC directly without professional representation, as anything you say can be used against you. A specialist SDLT adviser can: review the SDLT return and the basis of the claim; prepare a strategy for responding to the enquiry; handle all communications with HMRC; negotiate a settlement if appropriate; and represent you at tribunal if necessary. Early specialist involvement significantly improves the prospects of a favourable outcome. Relevant legislation: Schedule 10 Finance Act 2003 (SDLT enquiry provisions). Example: A client received an HMRC enquiry into a mixed-use SDLT claim. They contacted us before responding. We reviewed the claim, identified that the documentation was incomplete, gathered additional evidence, and responded to HMRC with a comprehensive analysis. The enquiry was closed without adjustment. Common mistake: Responding to HMRC's enquiry without specialist advice. Inappropriate responses can inadvertently strengthen HMRC's case and lead to additional SDLT and penalties.

Can HMRC charge penalties on SDLT underpayments?

Yes. HMRC can charge penalties for SDLT underpayments, ranging from 0% for innocent errors up to 100% of the underpaid tax for deliberate errors. Specialist advice can help mitigate penalties. HMRC can charge penalties where SDLT has been underpaid. The penalty regime is based on the taxpayer's behaviour: 0% for innocent errors (taking reasonable care); 0-30% for careless errors; 20-70% for deliberate errors; and 20-100% for deliberate and concealed errors. Penalties can be reduced for disclosure and cooperation. A specialist adviser can help mitigate penalties by demonstrating that the taxpayer took reasonable care, disclosing the position promptly, and cooperating with HMRC. In many cases, penalties can be significantly reduced or eliminated with the right approach. Relevant legislation: Schedule 24 Finance Act 2007 (penalty provisions). Example: A buyer underpaid SDLT by £50,000 due to an incorrect mixed-use claim. HMRC classified the error as careless. The initial penalty range was 0-30% of £50,000 = £0-£15,000. We negotiated a suspended penalty of £0 by demonstrating that the buyer had taken some care and cooperated fully with the enquiry. Common mistake: Ignoring HMRC enquiry notices or failing to cooperate. Non-cooperation leads to the maximum penalty range and makes mitigation much harder.

SDLT Advisory › Compliance

HMRC SDLT Enquiries

If HMRC has opened an enquiry into your SDLT return, specialist representation is essential. Understand your rights, the enquiry process, and how to protect your position.

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HMRC has the power to open enquiries into SDLT returns, and has been increasingly active in scrutinising SDLT claims, particularly mixed-use classifications, MDR claims, and higher rates exemptions. If you receive an enquiry notice, it is important to seek specialist advice immediately. We provide expert representation in HMRC SDLT enquiries, handling all communications and working towards the best possible outcome.

HMRC's Enquiry Powers

HMRC can open an enquiry into an SDLT return within 12 months of the filing date. During the enquiry, HMRC can request information and documents to verify the SDLT treatment. If HMRC believes SDLT has been underpaid, they can issue a determination requiring additional payment. In cases of error or fraud, HMRC can go back further using discovery assessments.

Common Enquiry Triggers

SDLT enquiries are most commonly triggered by: mixed-use property classifications; MDR claims (pre-June 2024); claims for the replacement of main residence exemption; claims for first-time buyer's relief; and transactions involving connected parties or trusts. HMRC uses risk-based criteria to select returns for enquiry.

Discovery Assessments

If HMRC discovers that SDLT has been underpaid after the enquiry window has closed, they can issue a discovery assessment. The time limits for discovery assessments are: four years for innocent errors; six years for careless errors; and 20 years for deliberate errors or fraud. Discovery assessments are a powerful tool for HMRC and require specialist representation.

How We Can Help

We provide expert representation in HMRC SDLT enquiries and discovery assessments. We handle all communications with HMRC, prepare responses to information requests, negotiate settlements, and where necessary, represent clients at tribunal. Our SDLT advisers have extensive experience in handling HMRC enquiries and achieving favourable outcomes for our clients.

Key Points

What You Need to Know

HMRC can open an enquiry within 12 months of the SDLT filing date
Discovery assessments can go back 4-6 years (or 20 years for fraud)
Common enquiry triggers: mixed-use claims, MDR, replacement of main residence
Specialist representation significantly improves enquiry outcomes
Do not respond to HMRC without professional advice

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SDLT Frequently Asked Questions

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