Thousands of property investors, businesses and private individuals could unknowingly be entitled to compensations worth thousands of pounds for negligent legal advice, relating to unclaimed tax relief on Stamp Duty Land Tax (SDLT), according to Andrew Stanley, managing director of MDR Claims.
When purchasing property people have to use a conveyancer, who in many cases calculates and arranges payment of stamp duty.
If solicitors fail to advise qualifying purchasers about multiple dwelling relief and do not take this into account when calculating stamp duty, the buyer could end up paying substantially more than necessary.
The multiple dwelling relief, introduced in July 2011, is available to those purchasing more than one dwelling from the same seller (e.g. a building containing 10 flats, even if on one title), or a number of properties in a linked transaction.
For multiple acquisitions of properties bought prior to July 2011, stamp duty was payable on the combined values of the properties purchased as specified by the old ‘slab’ system.
For example, someone buying four flats in a development worth £210,000 each would have paid 4 per cent in stamp duty on the total price of £840,000, being the percentage that applied to properties valued between £500,000 and £1 million. The stamp duty payable would have been £33,600 rather than the 1 per cent rate applicable to individual properties in the £125,000 to £250,000 band.
For qualifying applicants, the multiple dwelling relief means that the stamp duty rate payable on a combined value properties is based on their average value (the total value properties divided by the number purchased, subject to a minimum rate of 1 per cent).
So in the example above, they have to pay stamp duty of £2,100 for each flat, as the average value of £210,000 falls within the 1 per cent rate. The total stamp duty due would be £8,400, a massive saving of £25,200.
If buyers want to file a negligence case, however, they have to be quick because there are strict time limits on when a negligence case can be made. Extending this time period is possible, but with difficulty and only through the courts.
