Conveyancers miss SDLT relief resulting in massive overpayments and claims
PI insurer Howdens have reported insurers seeing a significant increase in claims arising from a failure to apply for Multiple Dwellings Relief (MDR) from SDLT resulting in massive overpayments of SDLT to the treasury.
The findings came to light at a roundtable hosted by Howden and SDLT Compass convened to discuss opportunities around SDLT relief and rules that are being missed that could lead to PII claims.
According to Hannah Mackinlay, a prominent lecturer on SDLT and director at SDLT Compass, there are currently 49 different reliefs from SDLT available.
The HMRC website details these through its . The various guides are routinely updated, with 12 updates in the final quarter of 2020 and 5 updates so far 2021.
“With so many changes is it unfair to expect fee earners, working in this pressured and cost-sensitive area of practice, to keep on top of the issue and ensure that they are asking the right questions and calculating the correct amount of SDLT payable by their clients?”
Says Hannah Mackinlay.
By their own admission, the SDLT Calculator on gov.uk “will work out the SDLT payable for most transactions. You should check the guidance if you are uncertain about how SDLT applies to your purchase or if you believe it may qualify for a relief.”
In May 2019 a core requirement in relation to SDLT was introduced into the Conveyancing Quality Scheme (CQS).
1.2. Practices must have a policy in relation to Stamp Duty Land Tax (“SDLT”) which must include:
a) how to audit trail the SDLT calculation and advice
b) how and when to make checks between the consideration stated in the sale contract and transfer deed and SDLT Return and the payments on the solicitors’ client account ledger for the transaction
c) a procedure for verifying the amount of SDLT payable, where applicable.
While it might be tempting dismiss this issue on the basis that most transactions are routine and the HMRC calculator is good enough to catch “most of” the “usual” reliefs available, Howden’s advised it is important to ensure conveyancers are up to speed with the tools available to help.
Hannah Mackinlay says
“Describing a transaction as ‘routine’ is not going to be a compelling defence when a disappointed client brings a PII claim against your firm for failing to apply the relevant relief. You might also struggle to explain this approach to the SRA given clause 4.3 of the SRA Code of Conduct for Firms which requires you to ensure that fee earners “are competent to carry out their role and keep their professional knowledge and skills….up to date”.
“Applying SDLT relief correctly require asking the right questions, which in turn needs a good working knowledge of the various reliefs and other SDLT rules that you can be confident you know what those questions are.”
For Hannah Mackinlay, SDLT is an issue has become increasingly problematic. She points to the guidance released by the Law Society in March where they note: “SDLT has become a tax with complex rules about the scope, rates and reliefs”.
“Although overpaid stamp duty can be reclaimed if the issue is raised within 12 months (4 years in exceptional circumstances) the matter would still be notifiable to insurers with a potential knock-on impact on premiums.”