Just over a week ago Angela Rayner resigned following the discovery of a Stamp Duty breach on a flat she owns in Hove. She declared that it was always her intention to pay the correct amount of tax and said she regretted not seeking specialist tax advice.
Now, regardless of how one feels about Angela Rayner’s affairs, her situation shines a light on the roles and responsibilities of all parties involved in the property buying process.
What her situation especially brings to the fore is the lack of clarity in the house-buying process around which professional should be responsible for providing the advice on Stamp Duty. If you ask the next three people this question you are likely to get different answers. I know this is the case as I, myself, have carried out the experiment a few times. Advice regarding Stamp Duty is required for every purchase transaction in the UK but it isn’t clear who is responsible for clients getting it right.
DEFINING RESPONSIBILITY
The lack of clarity around where the responsibility lies means there is a risk borrowers will fall foul to Stamp Duty and property laws in the same way Angela did. It’s important we have this discussion as an industry as well as addressing the question around whether accountants need to now become a mandatory part of the house-buying process.
My mantra, when it comes to mortgages, is ‘Keep It Simple’ and defining responsibility around who should be giving the advice on Stamp Duty will further simplify the process for borrowers, helping them feel informed and confident.
As mortgage brokers, we regularly provide our clients with information on the expected amount of Stamp Duty payable. After all, we are generally the first port of call for buyers during the house buying process.
For example, a client purchasing a property for £500,000 whilst selling their current home will pay £15,000 in Stamp Duty, whereas a client looking to keep their existing home as an investment and purchase their new home at £500,000 will pay £40,000 in Stamp Duty.
That’s a difference of £30,000 needed on completion day, so it goes without saying that it’s imperative that as brokers we factor in these costs to make the transactions work for our clients.
WHO SHOULD PROVIDE ADVICE?
However, where the lines start to become more blurred is around whose responsibility is it to provide advice on the actual amount payable. Calculating a first time buyer’s Stamp Duty is quite simple; however, when it comes to doing the same for separating couples and adding new partners to the mix or newly wed couples who each own their own properties prior to marriage, the situation is not so straightforward.
This is the same for some investment property transactions or even dare I say it, Trusts. In these situations, advice is crucial so that borrowers are both making the right financial decisions for their future once tax and fees and everything else is factored in.
Professional advice should only be given if you are qualified to provide it. Many solicitors will categorically say it isn’t their responsibility to calculate the Stamp Duty payable on a transaction.
However, solicitors are responsible for making the demand, completing the forms and making payment to HMRC, so you would naturally expect they would be responsible for the advice wouldn’t you? But this is not the case. As far as they are concerned, they do not charge for providing advice on Stamp Duty so why would they take responsibility for it.
THE ROLE OF ACCOUNTANTS
So who does the responsibility then fall to? Accountants? Are we saying that accountants now need to be involved in every housing transaction, adding another layer to the already very complex and long-winded property buying process.
In fact, there are accountancy firms that specialise in Stamp Duty advice but at Home of Mortgages, a brokerage who specialises in more complex and specialist transactions, we have only ever had a handful of clients in 20 years that have chosen to obtain specialist advice before proceeding with a purchase.
So, where does this leave us now? Is it the borrower’s sole responsibility to determine what Stamp Duty tax they need to pay? Are we saying all clients, regardless of their financial literacy, should take responsibility themselves to find the detail on the government’s website and inform their solicitor how much to Stamp Duty land tax they need to pay? People need advice and feel comfort in knowing they can fall back on the professionals advice when things go wrong.
Whilst Angela Rayner’s situation was a very complex and whether you choose to empathise with her or not, in my opinion, at some point during this transaction, a professional would have provided her with figures on the Stamp Duty amount payable.
I believe many people would have considered those figures advice rather than opinion. Angela, given her position, should have been more careful and done the relevant due diligence to ensure she paid the right tax but I don’t think the expectation is the same for all borrowers.
The issue of Stamp Duty in complex property transactions is clearly an area where we need clearer guidance as an industry otherwise more borrowers could fall foul to Stamp Duty laws.
