Solicitors paid wrong stamp duty

Bettiebee

I'm not sure whether anyone can help as I know it's new legislation. But back on the 15th April we completed on our new house buy. The sale of my existing property fell through so we decided to keep it as a small nest egg for the kids. This means I have 2 properties in my name. Spoke to the solicitor just before completing about what we were going to do about the extra £6500 stamp duty as we can't afford it and they had given me no warning about the change in duty, we'd already exchanged at this point. They suggested we put my previous property into a trust fund for the children and that should qualify us for the lower stamp duty. Anyway since completing we have constantly phoned the solicitors, calls aren't being returned and now I've found out no trust fund has been set up and they've paid the lower rate of stamp duty when they know full well I still have 2 properties in my name. I'm going to contact another solicitor to see if they can rectify the mess but I'm worried we'll be hit with a fine for not paying the correct amount on time. Any ideas if its still worth setting up the trust fund or I just contact HRMC and beg? I'm thinking I'll have to take out a massive loan and then get the old house sold ASAP.

AdrianC

I would have thought that the cost and other implications of putting your old property into a trust fund would FAR outweigh the extra SDLT.

I presume that this "nest egg" will be being let, rather than sitting empty. Who's going to be receiving the income from that? This trust?

Frankly, if £6,500 is THAT unaffordable, I'd say you can't afford to be a landlord. What happens when the tenants do a runner, leaving rent unpaid and the house trashed? It's not as if the SDLT changes were exactly top-secret. They were widely reported in the media at the time of the Chancellor's 2015 Autumn Statement, which is when they were announced, and since.

bigfreddiel

You have 18 months to sell the property and get a refund on the 3% extra stamp duty.

Get it back on the market now!

Renting will not make you much after paying tax, increased mortgage, landlords insurance, safety certificates for gas and electricity, upgrading house for tenants, paying letting agent fees etc. You'll be lucky to clear any more than £50-100 per week!

Then of course problem tenants could seriously damage any profit at all.

Good luck fj

Thrugelmir

Bettiebee wrote: »

Spoke to the solicitor just before completing about what we were going to do about the extra £6500 stamp duty as we can't afford it and they had given me no warning about the change in duty, we'd already exchanged at this point.

Then the problem is yours to resolve. You need to come up with the money. The solicitor could only pay over the funds they had.

davidmcn

bigfreddiel wrote: »

You have 18 months to sell the property and get a refund on the 3% extra stamp duty.

True, though they need to sort out paying the 3% extra first...but I doubt that's going to involve more than some bureaucratic hassle with HMRC and a £100 penalty for being late. Don't think it requires a new solicitor getting involved.

booksurr

bigfreddiel wrote: »

You have [STRIKE]18[/STRIKE] 3 years or 36 months to sell the property and get a refund on the 3% extra stamp duty.

Get it back on the market now!

Renting will not make you much after paying tax, increased mortgage, landlords insurance, safety certificates for gas and electricity, upgrading house for tenants, paying letting agent fees etc. You'll be lucky to clear any more than £50-100 per week!

Then of course problem tenants could seriously damage any profit at all.

Good luck fj

per above correction
https://www.gov.uk/guidance/stamp-duty-land-tax-buying-an-additional-residential-property

AnotherJoe

bigfreddiel wrote: »

You have 18 months to sell the property and get a refund on the 3% extra stamp duty.

Get it back on the market now!

Renting will not make you much after paying tax, increased mortgage, landlords insurance, safety certificates for gas and electricity, upgrading house for tenants, paying letting agent fees etc. You'll be lucky to clear any more than £50-100 per week!

Then of course problem tenants could seriously damage any profit at all.

Good luck fj

36 months and there's currently nothing to be reclaimed since they didn't pay it !

Agree with the rest this was tax tail wagging financial dog.

Thrugelmir

On the basis that the solicitor has filed the correct return.

Interest charges
You must pay any SDLT due within 30 days after the effective date of the transaction. If you pay the tax late, you’ll pay interest from the day after you should have paid it until the date when you actually pay it.

If you don’t pay the tax due on the transaction by the deadline, HMRC will send you a letter telling you about your underpayment. They send this to both the buyer and their agent and it tells you how much tax you’ve underpaid and how much interest you’ve been charged so far.

You should pay the tax and the interest as soon as possible.

HMRC uses the official rate of interest set by HM Treasury to work out how much interest you’ll have to pay. They’ll charge interest if:

they haven’t received your payment of the tax due
there’s no evidence to show beyond reasonable doubt that you sent your payment when you filed your SDLT return

Bettiebee

I had hoped not to have to justify my situation but I am fully aware of the implications of renting, there is no mortgage, a tenant is lined up and contingency savings are available. After loosing our second buyer in oct I decided to keep it as an investment for our kids and my nephew and yes let it out until we thought it was worth trying to sell again. This stamp duty was an unexpected cost and it's affordability at this time is difficult because we need to factor in letting or selling costs also.
We have been buying the house for 9 months, I have a 1 and 3 year old so no I don't always follow the chancellor's policies. I had seen something about tax increases making it hard for buy to let but as we were buying our home I thought nothing of it. I am merely human after all. I had hoped our solicitor would have picked up on it but no they failed on quite a lot of things. A bare trust fund is a simple document and has little cost involved.
I had transferred the monies to our solicitor based on an invoice made in October when we were originally due to move, I told them to let me know the updated version but they failed to let me know. They are legally required to ask me if I own another property, I had a conversation with them a week before moving saying I did and yet they have filled out the forms contrary to this. The only reason I want to get another solicitor is because I cannot contact mine and I just don't trust their advice or service. I now need to weigh up whether it is worth paying the tax, setting up a trust fund then asking for a refund or set up fund and hope they don't notice the 6 week gap or just pay the tax and sell as letting will be unfeasible with the funds we are left with.

franklee

Bettiebee wrote: »

I had hoped not to have to justify my situation but I am fully aware of the implications of renting, there is no mortgage, a tenant is lined up and contingency savings are available. After loosing our second buyer in oct I decided to keep it as an investment for our kids and my nephew and yes let it out until we thought it was worth trying to sell again. This stamp duty was an unexpected cost and it's affordability at this time is difficult because we need to factor in letting or selling costs also.
We have been buying the house for 9 months, I have a 1 and 3 year old so no I don't always follow the chancellor's policies. I had seen something about tax increases making it hard for buy to let but as we were buying our home I thought nothing of it. I am merely human after all. I had hoped our solicitor would have picked up on it but no they failed on quite a lot of things. A bare trust fund is a simple document and has little cost involved.
I had transferred the monies to our solicitor based on an invoice made in October when we were originally due to move, I told them to let me know the updated version but they failed to let me know. They are legally required to ask me if I own another property, I had a conversation with them a week before moving saying I did and yet they have filled out the forms contrary to this. The only reason I want to get another solicitor is because I cannot contact mine and I just don't trust their advice or service. I now need to weigh up whether it is worth paying the tax, setting up a trust fund then asking for a refund or set up fund and hope they don't notice the 6 week gap or just pay the tax and sell as letting will be unfeasible with the funds we are left with.

Well I know practically nothing about this but I would guess it can't be that easy or everyone would do it, so a quick google and this article seems to say the children need to be over 18 or the higher rates apply anyway:

Wealthy families find stamp duty loophole to buy property for children
http://www.telegraph.co.uk/investing/buy-to-let/wealthy-families-find-stamp-duty-loophole-to-buy-property-for-ch/

"The draft legislation makes a special case for trust beneficiaries who are minors - it confirmed that where the parents are trustees and own other property, the higher rates would apply.

Minors cannot own property directly, so some form of trust is a necessity if a child under 18 - rather than their parents - is to own it.

There is thus an incentive to wait until the child is over 18 and set up a trust then."

davidmcn

Bettiebee wrote: »

They are legally required to ask me if I own another property

No - they may have been negligent in the advice they gave you (or in their completion of your SDLT return on your behalf), but there's no general requirement for solicitors to ask you this. You are legally required to submit an accurate tax return.