Can a stamp duty refund adviser charge a percentage of the refund but not the HMRC interest?

Introduction

People who receive a Stamp Duty Land Tax refund often find that the amount paid by HMRC is higher than the tax originally reclaimed. That is usually because HMRC has added repayment interest. A common question then follows: if an adviser charges a percentage-based fee, should that fee be calculated on the tax refund alone, or on the tax refund plus the HMRC interest?

This matters because the difference can be significant. It also matters where there has been confusion about whether VAT applies to the adviser’s fee, especially if the adviser was previously VAT registered and later deregistered.

The Question

A taxpayer successfully received an SDLT refund from HMRC. The total amount paid by HMRC included both the underlying tax refund and an additional amount of statutory interest. The adviser’s agreed fee was a percentage of the refund recovered. The taxpayer wanted to know how the fee should be worked out, particularly where:

• the total received from HMRC was more than the original tax reclaimed because interest had been added;
• there was some uncertainty about whether the agreed percentage was inclusive of VAT or whether VAT should be added on top; and
• the adviser had since ceased to be VAT registered.

Nick’s Explanation

Nick’s explanation was straightforward. He confirmed that the adviser’s fee was 15%, not 18%, because the business had deregistered for VAT. He also made clear that the fee was being charged only on the refunded tax, not on the interest added by HMRC.

In anonymised form, his key point was:

“We have deregistered for VAT, so the fees are 15%, not 18%. 15% plus VAT would have been 18%.”

The related correspondence also explained that where HMRC paid more than the original reclaim because of interest, “everything above the refund amount is interest, and we will not charge for that.”

So the practical position taken was:

• identify the actual SDLT overpayment repaid by HMRC;
• exclude any repayment interest from the fee calculation; and
• apply the agreed percentage to the tax refund only, with VAT added only if the adviser is VAT registered at the relevant time and the contract requires it.

The Law

There is no special SDLT statute that fixes what a private adviser may charge a client for making or assisting with a refund claim. That is usually governed by ordinary contract law, consumer law, and VAT law.

The legal framework normally involves three separate questions:

1. What did the contract actually say about the adviser’s fee?
2. Did the contract define the fee by reference to the “refund”, the “tax saved”, the “amount recovered”, or some other wording?
3. Was VAT properly chargeable on that fee at the time of supply?

For VAT purposes, if a business is not VAT registered, it cannot charge VAT on its invoices. If it is VAT registered, VAT may be chargeable depending on the nature of the supply and the contractual wording.

For contract purposes, if the agreement says the fee is a percentage of the “refund obtained”, there may still be room for argument about whether that includes statutory interest, unless the contract defines the term clearly. If the agreement instead refers to the tax reclaimed or tax saved, that points more strongly to the fee being calculated on the tax element alone.

Under general consumer law principles, any fee term should also be transparent and prominent. If there is ambiguity in consumer-facing wording, that may be interpreted in the way more favourable to the consumer.

Analysis

The issue can be analysed in a simple sequence.

1. First, separate the HMRC payment into its components. In many refund cases, HMRC pays:

   • the SDLT overpayment itself; and
   • repayment interest.

   Those are not the same thing. The tax refund is the amount overpaid. The interest is compensation for HMRC holding the money.

2. Second, check the fee wording. If the adviser agreed to charge a percentage of the sum reclaimed, it is necessary to ask whether that wording was intended to cover the tax only or both tax and interest. In the scenario here, the adviser expressly stated that the fee would not be charged on the interest element.

3. Third, check the VAT position. If the agreed fee was historically described as, for example, 15% plus VAT, that produces a higher total while the business remains VAT registered. But once the business has deregistered, VAT should no longer be added. In practical terms, that means a fee that used to be 15% plus VAT becomes simply 15%.

4. Fourth, apply the arithmetic. If the refunded tax was £16,750 and the agreed fee was 15%, the fee is £2,512.50. If HMRC also paid interest on top, that interest does not increase the fee if the adviser has agreed to exclude it.

This is a sensible approach because repayment interest is not part of the underlying SDLT overpayment. It is an additional statutory amount paid by HMRC. Unless the contract clearly says otherwise, many clients would reasonably expect a percentage-based reclaim fee to be based on the tax recovered rather than on the interest.

Outcome

The practical conclusion is that a percentage-based SDLT refund fee can properly be calculated on the refunded tax alone, excluding HMRC repayment interest, if that is what the adviser has agreed or what the contract fairly means.

On the facts described here, the correct outcome was:

• use the SDLT refund amount only;
• ignore the interest added by HMRC for fee purposes; and
• charge 15% with no VAT because the adviser was no longer VAT registered.

Practical Steps

If you are checking an invoice after an SDLT refund, the safest approach is:

1. Obtain HMRC’s repayment breakdown and identify how much is tax and how much is interest.
2. Read the adviser’s engagement terms carefully, especially any clause dealing with “refund”, “repayment”, “tax saved”, “tax recovered”, or VAT.
3. Check whether the adviser was VAT registered when the invoice was issued.
4. Ask for a written explanation of how the invoice was calculated.
5. If the wording is unclear, ask whether the fee is being charged on the tax only or on tax plus interest.
6. Keep copies of the engagement terms, invoice, and HMRC repayment notice in case a dispute arises later.

If the underlying refund itself depended on a claim that a dwelling was not suitable for use as a residence, readers should also be aware that the condition threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That case concerns eligibility for relief or refund arguments, rather than how an adviser’s fee is calculated, but it is important context for anyone assessing whether a claim was valid in the first place.

Conclusion

Where HMRC pays both an SDLT refund and repayment interest, the adviser’s percentage fee does not have to be calculated on the full amount received. If the agreement or subsequent confirmation makes clear that interest is excluded, the fee should be worked out on the refunded tax alone. VAT should only be added if the adviser is VAT registered and the contract provides for it.

Legal References Used

• Value Added Tax Act 1994
• Consumer Rights Act 2015
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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