Stamp Duty overpayments are a hot topic in the UK Property market at the moment. As the cost of living continues to rise to unprecedented levels and interest rates go up, impacting mortgages, it’s only to be expected that people will become more acutely aware of where savings may be made and more importantly, where they may have been missed. Here, we talk about the really scary facts behind Stamp Duty Overpayments.
It happens more than you might think
With 49 exemptions, exceptions and reliefs, plus the added complexity of additional factors like the Higher Rate on Additional Dwellings (3% Surcharge) and the 2% Non-UK Resident Surcharge, errors in Stamp Duty Land Tax calculation are actually fairly common. They’ll also often go unnoticed which is in favour of the Revenue at the expense of the taxpaying Client.
It can really cost the Client
Missing a relevant relief or exemption can make a difference of thousands, tens of thousands or even more to your client’s SDLT bill. If an opportunity to claim Multiple Dwellings Relief is missed or a property is not correctly assessed as Mixed Use, for example, a client may end up paying substantially more than they should. And how many clients can afford to lose that sort of money at the moment?
It can cost your firm
SDLT liability strictly lies with the buyer of course, but who will they look to for advice on this matter and who is likely to get the blame if they find out it was done wrong? In 2019, Advanced Mortgage Lending ended up fined by the Financial Ombudsman due to an SDLT error which cost their clients money, having given the client an estimate of their SDLT liability supplied to them by a solicitor. How likely is it, if a complaint went before the SRA or CLC, that the defence of and exclusion clause would work?
It can really cost your firm
It’s not just potential fines and/or compensation offered to a client where you’ve got it wrong. There’s the reputational impact in a competitive market. There’s also the knock on impact on things like PII premiums, which are already at an all time high with no signs of a reversal any time soon. Can your firm really afford another steep hike in premiums come renewal time?
You often won’t find out until it’s too late
HMRC isn’t in the business of tracking down where it might have received too much tax as a general rule, and certainly not when it comes to SDLT. Law firms will seldom recognise an error and clients will mostly assume they’ve paid the right amount because the solicitor said so. Most clients will become aware of a potential error when a Claims Farm digs up their details and makes contact. By the time you get to hear about it, the client has already been persuaded of a grave error having been made and is unlikely to be in the mood to listen to any explanation not accompanied by a large cheque.
Exclusion Clauses aren’t the magic bullet you might think
Many firms may attempt to limit liability in areas like SDLT by placing exclusion clauses in their letter of instruction. The trouble is, the evidence to date suggests that these don’t really work, and certainly not in the way you might hope.
It’s not all doom and gloom
Fortunately, help is at hand which can avoid these types of mistakes and ensure that you get the SDLT on your clients’ purchases right first time, every time. Compass is a straightforward, easy to use tool which integrates seamlessly with existing systems and is backed by its own PII cover, not yours, and uses the expertise of some of the UK’s leading tax advisers.
If you want to avoid SDLT risk and the headaches that come with it, there’s no better solution.
This article was submitted to be published by SDLT Compass as part of their advertising agreement with Today’s Conveyancer. The views expressed in this article are those of the submitter and not those of Today’s Conveyancer.
