HM Revenue & Customs (HMRC) has raised the alarm over a growing stamp duty refund scam that is tricking property buyers—particularly those purchasing homes in need of renovation—into parting with thousands of pounds. Fraudsters are exploiting tax loophole misconceptions, offering to reclaim Stamp Duty Land Tax (SDLT) on the false basis that such properties qualify as “non-residential.”
While buyers may initially see money returned to their accounts, HMRC stresses that such claims are invalid. Once reviewed, the refund must be repaid in full—often with interest and penalties—leaving victims in a far worse financial situation.
How the Scam Works
Fraudulent agents typically approach potential victims through letters, emails, or social media adverts, promising a “no win, no fee” refund service. Their pitch centres on convincing buyers that because a property requires significant renovation, it is temporarily uninhabitable and therefore eligible for non-residential SDLT rates.
The process often unfolds as follows:
- The agent submits a refund claim on behalf of the buyer.
- HMRC initially issues a repayment.
- The agent takes a commission—usually around 30%.
- On review, HMRC determines the claim is invalid.
- The buyer must then repay the full refund plus penalties and interest, while the agent vanishes with their cut.
This leaves the buyer not only worse off financially but also exposed to potential investigations and stress from HMRC compliance teams.
A Real-Life Example Exposed by HMRC
To illustrate the dangers, HMRC provided the following case study involving a London property:
| Transaction Detail | Amount (£) |
|---|---|
| Purchase Price | 1,100,000 |
| SDLT Paid at Residential Rate | 53,750 |
| False Refund Claimed | 9,250 |
| Agent’s Commission (30%) | 2,775 |
| Net Refund to Buyer | 6,475 |
| Repayment Required to HMRC (plus penalties) | 9,250+ |
While the buyer initially benefited from a £6,475 net refund, they ultimately had to repay more than £9,250 once HMRC flagged the claim. The agent, meanwhile, had already pocketed nearly £3,000 in commission.
Court Ruling Strengthens HMRC’s Position
The Court of Appeal recently reinforced HMRC’s stance in the case of Mudan & Anor v HMRC. The ruling confirmed that a property remains residential for SDLT purposes even if it requires extensive repairs.
This landmark decision makes clear that:
- Properties with essential living features—such as kitchens, bathrooms, and sleeping areas—are residential even if in poor condition.
- Claims based solely on disrepair or habitability issues are not valid grounds for refunds.
- HMRC is legally supported in rejecting and recovering false claims.
The Financial and Legal Risks for Buyers
Falling prey to these scams can result in severe consequences for property buyers, including:
- Repayment of the entire refund, along with interest and penalties.
- Loss of the agent’s commission, which is rarely recoverable.
- Possible HMRC investigations, which can be lengthy and stressful.
Victims often find themselves financially worse off than if they had ignored the fraudulent offer entirely.
Why Are More Buyers Being Targeted?
A key driver behind the rise in refund scams is the recent shift in stamp duty liabilities. According to Zoopla data, 83% of buyers now pay SDLT, compared with just 49% before April 2025’s tax changes.
These adjustments increased costs substantially:
- Up to £2,500 more for many home movers.
- Up to £11,250 more for first-time buyers.
| Factor | Impact |
|---|---|
| Higher SDLT rates | Increased financial strain for buyers |
| Social media misinformation | Scammers reach larger audiences |
| Post-April tax rule changes | Greater temptation for “refund” offers |
With homebuyers under pressure from higher costs, many are more vulnerable to agents offering seemingly easy financial relief.
HMRC’s Advice for Home Buyers
Anthony Burke, HMRC’s Deputy Director of Compliance Assets, cautioned that pursuing invalid claims can leave buyers far worse off:
“If the claim is inaccurate, you could end up paying more than the amount you were trying to recover.”
To protect themselves, HMRC urges buyers to:
- Verify any refund claims directly with HMRC.
- Seek advice only from regulated tax professionals.
- Avoid engaging with unsolicited offers from agents.
- Report suspicious approaches to HMRC immediately.
By following these steps, buyers can avoid costly mistakes and ensure they remain compliant with SDLT requirements.
The Bigger Picture: Tackling Tax Scams in the UK
This warning is the latest in a series of HMRC campaigns targeting tax fraud and scams. As financial pressures rise, fraudulent schemes—from fake tax rebates to bogus childcare savings claims—are becoming more sophisticated.
HMRC’s message remains consistent: only legitimate claims submitted directly to HMRC or through regulated professionals are safe. Buyers should remain vigilant, especially when offers appear too good to be true.
5 SEO FAQs
Q1. What is the new stamp duty refund scam reported by HMRC?
Fraudulent agents are tricking buyers into believing they can reclaim stamp duty by claiming their property is non-residential due to disrepair.
Q2. Who is being targeted by these scams?
Primarily buyers of renovation properties or homes needing major repairs.
Q3. What happens if you make a false refund claim?
HMRC will require full repayment of the refund, plus interest and penalties. You may also lose any commission paid to the agent.
Q4. What did the Court of Appeal rule on stamp duty and disrepair?
It confirmed that properties needing repairs remain residential for SDLT purposes and do not qualify for refunds.
Q5. How can buyers protect themselves?
By verifying claims directly with HMRC, consulting regulated tax advisors, and avoiding unsolicited refund offers.