What to Expect in an SDLT Compliance Check

When HMRC decides to review your Stamp Duty Land Tax (SDLT) return, it doesn't mean they suspect wrongdoing. Most compliance checks are routine exercises to understand transactions better and ensure the system works correctly. Knowing what to expect and how to respond can help the process run...

Why HMRC carries out compliance checks

HMRC checks some SDLT returns after submission for three main reasons:

To understand the details of your property transaction
To verify the accuracy of the information provided
To ensure the SDLT system operates as intended

It's important to understand that receiving notice of a compliance check doesn't mean HMRC believes you've done anything wrong. They know most returns are completed correctly, but random checks form part of their standard procedures.

How HMRC will contact you

HMRC will write or phone to inform you they're checking your land or property transaction return. If you use an accountant or tax adviser, they'll contact them as well.

When HMRC gets in touch, they will:

Explain what information they need from you
Give you reasonable time to provide the requested information

HMRC normally has 9 months from the filing date to notify you they're starting a check. This period extends if you've amended your tax return because you discovered new information or because earlier information was misleading.

What information HMRC might request

During a compliance check, you'll need to provide records relating to your SDLT transaction. This typically includes:

Contracts and conveyances
Maps, plans or other property documents
Payment records and receipts
Details of any financial arrangements

You must keep records of each SDLT transaction for at least 6 years from the effective date of the transaction. Failing to maintain adequate records for the required period can result in penalties.

Responding to information requests

Providing the requested information promptly helps end the check sooner. If you can't meet a deadline, contact HMRC to explain why – they may grant you more time. Any records you submit will be returned to you.

If you don't provide the information HMRC needs, they may issue a formal request. You must respond quickly to formal requests, as failing to do so can lead to penalties.

While you can continue using an agent to deal with HMRC during the check, remember that you remain personally responsible for your tax affairs. Ensure all information your agent provides is accurate.

Meetings with HMRC

HMRC may ask to meet you to discuss the transaction and the information you've provided. They'll tell you in advance what topics they want to cover. You're entitled to bring a professional adviser, friend or relative to any meeting.

Correcting mistakes during a check

If HMRC has already started a compliance check and you discover an error or omission on your SDLT return, you can still amend it within 12 months of the filing date. However, if the correction means you're due a repayment, you won't receive it until after the compliance check finishes.

If your amendment reveals you've underpaid SDLT, pay the additional amount immediately. Interest accrues from the date SDLT was originally payable, so prompt payment minimises interest charges.

Possible outcomes

When the check concludes, you'll receive a closure notice. There are three possible outcomes:

Nothing wrong: You'll receive a letter confirming the check is finished with no changes to your SDLT return.

Overpayment: HMRC will amend your return to show the correct figures and issue a repayment. In some cases, you'll also receive interest on the amount you overpaid.

Underpayment: HMRC will send a decision letter explaining how much you must pay, how it's been calculated, and the payment deadline. You may face interest charges if the tax should have been paid earlier, and potentially penalties as well.

Penalties

HMRC considers penalties if inaccuracies result from careless or deliberate behaviour. When determining penalty amounts, they consider:

The extent to which you fully disclose any inaccuracy and explain how and why it occurred
How helpful you've been in quantifying the inaccuracy
Your level of cooperation during the check

If you submit an amended return more than 14 days after the closure notice but within 3 months of that 14-day limit, you'll face a £100 penalty. In all other late amendment cases, the penalty is £200.

Late payments also incur interest charges.

Your rights during a compliance check

If you believe you've provided all necessary information and HMRC has had sufficient time to consider it, you can ask them to explain why they're continuing the check. Tell HMRC why you think the check should stop. If they disagree, you may ask an independent tribunal to decide whether the check should end.

Appealing decisions

If you disagree with HMRC's decision, write to them within 30 days of the decision date explaining why you believe it's wrong. You can appeal against:

HMRC's amendment to your SDLT return
Any assessment you believe is incorrect
Penalties you've been charged

If you can't reach agreement, you can request a review by an HMRC officer who hasn't previously been involved in your case. You also have the right to take your case to an independent tribunal. Full details of the appeals process will be included with any amendment or assessment.

Sources

Stamp Duty Land Tax: HM Revenue and Customs compliance checks

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.