HMRC needs to urgently address the lack of clarity in parts of their stamp duty guidance, which has led to unnecessary confusion for solicitors and their clients, according to Cornerstone Tax.
Stamp duty – prior to the existing holiday – typically costs homebuyers in the region of £13bn a year collectively, but there has been no shortage of complaints from consumers and advisers over thousands of pounds being mistakenly added onto people’s property purchases, usually by solicitors who are unsure of the rules around the levy.
It has been estimated that more than £3bn worth of stamp duty was overpaid in 2015/16 due to mistakes in advice and confusing complex rules, and yet the tax remains poorly understood.
With the existing stamp duty holiday due to end in March, the complexities of the tax are no clearer, and remain complicated, not just for homebuyers, but often the solicitors and tax advisers employed to make sense of the rules and regulations surrounding the purchase of various types of property.
Cornerstone Tax estimates that mistakes in advice around pensions specifically mean that around 120,000 people in the UK could be owed refunds for just one of the many issues with Stamp Duty advice.
David Hannah, principle consultant and founder of Cornerstone Tax, said: “The mistakes being made are in almost all cases totally unintentional and otherwise made in fear of underpaying. Most legal professionals are ill-equipped to navigate the complex rules around it and need help.
“The law around SDLT is incredibly complex and many advisors who help homebuyers evaluate how much they should pay are trained only to differentiate between residential and commercial property.
“They simply aren’t familiar with the intricacies of the law’s evaluation criteria, which has led to many being mis-advised unintentionally. There are a number of other reasons why people have overpaid; it’s not always a misinterpretation of the 3% surcharge.”
According to the latest research from Cornerstone Tax, more than half – 52% – of property purchasers feel there should be an independent office set up that audits stamp duty transactions to ensure people pay the right amount and not too much.
The study also revealed that 36% of homebuyers are mistrusting of the legal sector during property transaction and have felt ripped off by solicitors when buying and selling property, while 13% of those acquiring property feel that they were forced to pay too much stamp duty in error due to their solicitor.
In addition, the study found that 14% of buyers have been forced to take out short-term loans or emergency credit to cover the cost of unexpected stamp duty payments, and yet 61% of homebuyers said that they have never even considered whether there was a mistake in the stamp duty they paid.
Hannah commented: “This research demonstrates a lack of clarity in and around stamp duty land tax, both by the public and by the legal sector.
“With millions of properties giving access to infrastructure companies, having shared outdoor space or premises for commercial use, solicitors have a duty of care to inform their customers of all potential stamp duty reductions.”
Nice to see some of the “blame” for things going wrong has shifted to the lawyers and away from the estate agents.
Is stamp duty really that complicated? Lawyers are quite clever bunnies. I am sure they should be able to work it out.
The Government’s published guidelines are pretty clear.
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Is Stamp Duty that complicated? I have just reviewed Stamp Duty Land Tax, by Sean Randall (20 years’ experience advising on stamp taxes). The unequivocal answer is, yes very!
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Thanks Rob. The tax is very complicated. It’s unrealistic for this to be solved by guidance. Guidance is necessarily generic and the tax is sensitive to the facts. The issues are also very nuanced. I think an answer is for lawyers to routinely refer clients to specialists. That’s obviously a self-serving statement. But the answer is usually simple and certain (for the specialist), and this exercise can be done cost-effectively. My book is aimed at helping lawyers filter standard cases from complex ones, which might require advice. Personally, I wouldn’t say that “access to infrastructure companies and having outdoor space” is an indication that stamp duty has been over-paid. And I suspect these arguments will be the subject of appeals in the courts in the near future.
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