The number of stamp duty tax investigations by HM Revenue & Customs dropped by 75% last year from 2,096 in 2019/20 to just 529 in 2020/21, analysis by law firm Boodle Hatfield has found.

The private wealth solicitors warn that HMRC is likely to step up investigations again now that lockdown has ended and the furlough scheme is drawing to a close.

Boodle Hatfield says it is likely that HMRC is now starting to examine stamp duty returns submitted during the pandemic. 

As the furlough scheme winds up and the tax office returns to normal working practices, investigations are expected to return to pre-pandemic The interpretation of how different stamp duty reliefs apply can be subjective and HMRC sometimes challenges property owners who misunderstand the rules as well as those who willfully defraud the taxpayer.

Some property owners can legitimately reduce their tax bill, if their property qualifies for the lower commercial rate of stamp duty because it is mixed-use, incorporating both residential and commercial elements.

They might also be able to claim multiple dwellings relief if their property has a granny flat or annex.

Boodle Hatfield partner Kyra Motley, Partner says: “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.”