Stamp Duty Land Tax, MDR & Claims farms
I read David Pett’s article the other day with great interest. To summarise my view, it’s an interesting and creative viewpoint, but talking to litigators specialising in this area it is I fear not one that a High Court judge will have much truck with. To quote one recent decision “I can deal with this very briefly. As I have said, I am satisfied that it falls within a solicitor’s retainer to calculate SDLT accurately.” The higher courts have a track record of being very hard on solicitors, none of them having ever had experience of working at the coal face and the invidious pressures conveyancers are under. I wish you luck with your arguments David!
I have been lecturing on SDLT since it came in in 2003 and have lectured to probably solicitors numbering into the thousands about SDLT (including MDR) and its complexity. Everyone knew these issues were there in the background. I am surprised that this reckoning has been so long coming, to be honest.
Why are we here?
From the very beginning I have thought that there is no way we should become the unpaid Inspector & Collector of Taxes for HMRC any more than we do VAT returns or CGT returns on sales. Sadly, (as always) our professional body did nothing to protect us from the additional burden. Had the Law Society lobbied strongly and effectively that this was not part of the conveyancing process, and was between the taxpayer and the HMRC, we would not be here now. But like so many other things, it was another thing loaded onto the camel’s back without demur.
Heads they win, tails you lose
When these cases finally go to trial the main losers will the solicitors firms, either way, win or lose. Costs, management time, insurance hikes, loss of client good-will, bad PR etc. will mean any victory is a pyrrhic one, and losing such cases will make it much worse.
Don’t be Captain Hindsight!
Personally, if I was a COLP or COFA or head of a conveyancing department I would want to be taking steps now to make sure that my firm is not going to be worried about such claims in the future. Dealing with SDLT has to be de-risked, in the same way that the market adopted title insurance and countless other search products that blossomed following the widespread destruction or loss of title deed packets in the early 2000’s.
What has to be learned from this?
The main issue for firms is – what are they going to do about it going forward? In addition, any COLP worth their salt should be looking at whether the firm is complying with the CQS and Law Society’s recent guidance on SDLT in August 2020. Failing to deal with SDLT properly could even in some cases be seen as a threat to the survival of a firm, given PI issues that they could cause.
So the real question is – what are you going to do about one of the most complex taxes on the statute book now that the profession cannot fail to be aware of the importance of getting it right? This has also been thrown into focus by the current SDLT residential rate holiday.
What are the options to de-risk SDLT?
Do all conveyancers now have to become tax experts and spend lots of time on each return?
Does your client have to pay thousands of pounds for tax advice from top accountants each time?
Do you have the worry of claims farmer letters to your clients, with the rear-guard action costing a fortune in management time, insurance hikes, ‘ex gratia settlements’, LeO, and loss of client good-will?
We all hope that most of the time SDLT will be straightforward. However there are cases where something is complex or unusual – the ‘unknown unknowns’. Not only will you need to come to the correct answer, you’ll need to demonstrate how you come to the correct answer and show an audit trail to comply with the CQS and the Law Society’s guidance. The problem is, a lot of the time you don’t know which are straightforward and which aren’t, as the right questions are not being asked.
De-risk SDLT at no cost to your firm
Thankfully, there is a technology solution. SDLT Compass is a simple cost-effective way of completely de-risking the issue, For only £50+VAT a case (which can be billed to the client) an online assessment asks you to answer some questions about the transaction, the property and your client. The expert system analyses the answers and guarantees the right amount of tax is paid.
The system will sift out the complex or unusual cases for you, and set out the options. It will then leave you and your client either to ask us for quick and accurate bespoke advice, or for you to form your own view, or seek other tax advice.
The result is that dealing SDLT can be completely de-risked for your firm, in the same way that searches and title insurance are commonly used to deal with issues arising from the title.
LLB MA FRSA Solicitor
Director, SDLT Compass