6 Reasons you should avoid using the HMRC Stamp Duty Calculator

HMRC very ‘kindly’ provide a free stamp duty calculator on their website, accessible to anyone, to enable the SDLT due on any purchase to be calculated.

But is it really fit for purpose, and should law firms be relying on it to calculate this constantly controversial tax on behalf of their clients?

Here’s six reasons why we think you should avoid it:

1. It provides no protection to solicitors

What many buyers and even lawyers still don’t take into account is that SDLT is a self-assessed tax for which the purchaser is directly liable. Unlike the old Stamp Duty, it isn’t simply a tax on documents, and that means when it’s done wrong, your clients can end up with a large bill which they will likely beat a path to your door to discuss.

By using HMRC’s calculator, you have given yourself no protection from this, laced as it is with loose, disclaimer-y language designed to ensure that anyone relying on it has o comeback in the event a error is made.

2. It’s not just your neck on the line

In 2019 the Financial Ombudsman Service ordered the payment of compensation in the order of £30,000 to a client by Advanced Mortgage Funding, a broker. Their misdemeanour? Incorrectly advising their client of the SDLT liability on their new purchase, causing the clients to have to take out additional borrowing at the eleventh hour following exchange when advised of the true SDLT liability.

How had this happened? Because AMF had called their local friendly solicitor who had given them a figure, most likely obtained by using the SDLT calculator. In these difficult times, you can’t afford to leave your local network of contacts in the lurch.

3. It’s not Comprehensive

When we were developing Com-pass we spent hours entering various test cases into HMRC’s online calculator and what we discovered was that it was even less comprehensive than we had initially feared. Properties which could be missed use, properties which may have an annexe and many more were simply missed altogether, meaning that potential SDLT reliefs were also being missed.

Don’t take our word for it though – look at the introductory text above the calculator itself – ‘The calculator will work out the SDLT payable for most transactions.’ (our emphasis).

4. It’s clunky and unintuitive

HMRC’s calculator is also not the easiest system to use. Apart from asking limited questions which leave out a number of factors relevant to the calculation of Stamp Duty, it’s also unnecessarily obtuse.

The first question it asks is whether or not the property is leasehold, with a clarification which states you are only to tick leasehold if it’s an acquisition of a new lease. Not exactly ‘user-friendly’.

5. Merely ‘a guide’

HMRC themselves once gave a quote to the Times describing their calculator as intended merely ‘as a guide’ rather than a comprehensive tool. This was in response to comments made with regards to the efficacy of the calculator itself and how this related to the large number of cases of overpaid SDLT which occur each year in the U.K.

6. There is a better way

The single best reason to not use the HMRC calculator is that a better solution exists. Compass can be integrated into your case management system, so no need to visit a separate website. It asks comprehensive questions designed to ensure every relevant variable is accounted for. It’s backed by a dedicated team of expert advisers for especially tricky scenarios.

It’s fully PII backed, meaning that the responsibility for the calculation is outsourced from your firm. And it’s constantly monitored and updated in line with the latest changes to SDLT legislation.

Compass is your one-stop solution to make sure SDLT errors are a thing of the past, and you can focus on the various other challenges facing your firm in the modern marketplace. The real question is, why wouldn’t you use it?

Kindly shared by Compass

Main article photo courtesy of Pixabay