Stamp Duty Mistake by Solicitor

Mel_Wood

Hi all, I've done a bit of a search but can't find this asked before, but would really appreciate any advice anyone might be able to offer please?

In brief
Bought house in March 2015. Solicitor now advises they didn't request enough Stamp Duty from us. Now wants us to stump up the £1,200 balance. We simply don't have it.

More detail
We received the final account for conveyancing and all duties/searches, and as I wanted to make sure everything was correct before completion , I asked them to double check all figures, then we paid in full. Stamp Duty was noted as £800

Two years later we received a letter from solicitor saying they had mistakenly overpaid HMRC by paying them the £800 twice. They asked us to sign a form allowing them to reclaim the second £800 from HMRC.
That seemed very odd, I mean we don't know what has been paid/overpaid between solicitor and HMRC, but we trusted in solicitor and signed and returned the form.

Evidently when they have tried to reclaim it, HMRC have told solicitor the SD should have been £2,000, not £800
Likely the confusion has come about because we originally looked to buy a doer-upper house for £165k, but that fell through on survey and instead we completed on one at £225k

The solicitor admits by letter that they made a mistake and put the wrong figure on our final bill and they 'would like to talk to us about it'

I understand that it is the homebuyer, not the conveyancing solicitor, that owes the Duty to the HMRC, but it is a nasty shock to learn about it so long after the event, and annoyed that the mistake has been made especially after we asked them to check all figures to make sure everything was correct.

Does anyone have any advice on where we stand please? We certainly don't have that sort of money available to write a cheque, unfortunately!

Bossypants

It's an unfortunate situation but I'm afraid you will have to pay it, just like you would expect HMRC to return the money if you had overpaid.

Having said that, given that it's a solicitor error and they have already made mistakes on your file, I think it's reasonable to tell them that you don't have the money to hand and ask to work out a payment plan with them.

Separately, it might also be worth looking into whether you can afford to start putting a little something into an emergency fund once a month. £1200 is a substantial sum, but it's also not that much in the greater scheme of homeownership. What will you do if the boiler breaks down? If there is a gas leak or flooding and you suddenly need to take the family elsewhere for the night? Etc.

nicmyles

Assuming the figure they are now giving you is the correct stamp duty for the property you bought, I imagine you'll need to pay it.

That said, it's a good thing they're admitting their error and want to discuss it, rather than just issuing a demand. I'd be trying to negotiate the figure down with the solicitor so that they cover part of it or write it off. Failing that, I'd be asking them to cover the bill initially and then pay them back in installments (or come to a similar arrangement with HMRC separately from the solicitor).

Mel_Wood

That's all fair advice, both first and second parts. At this stage they have (in the letter) acknowledged that they made the mistake, and have only asked to talk about it, so it sounds like they would be open to some sort of payment plan, rather than just sending us a flat out bill! Unfortunately solicitor was not available to talk to today so will see what they say when I can reach them. Thank you Bossypants, much appreciated.

Mel_Wood

nicmyles wrote: »

Assuming the figure they are now giving you is the correct stamp duty for the property you bought, I imagine you'll need to pay it.

That said, it's a good thing they're admitting their error and want to discuss it, rather than just issuing a demand. I'd be trying to negotiate the figure down with the solicitor so that they cover part of it or write it off. Failing that, I'd be asking them to cover the bill initially and then pay them back in installments (or come to a similar arrangement with HMRC separately from the solicitor).

Yep, it seems to be right for the time of sale nicmyles. I think any part that the solicitor might negotiate off because of their error would be a real bonus, but I'll expect to have to pay it all over a period, if not...

Will see how they feel about it. The fact we're only hearing about it now that it's over two years after the event has shocked me though!

DumbMuscle

It's worth bearing in mind that at this point you effectively owe HMRC £400 (since £1600 was paid by your solicitor), and your solicitor £800 (since they incurred an £800 disbursement which you have not paid yet).

I would also double check anything else that the solicitor should have done, just to be sure - if it was just the one screw up, then that would probably be fine, but the fact that they seem to have made 2 separate mistakes on the same file suggests to me that there may be more hiding in the woodwork.

Mel_Wood

DumbMuscle wrote: »

It's worth bearing in mind that at this point you effectively owe HMRC £400 (since £1600 was paid by your solicitor), and your solicitor £800 (since they incurred an £800 disbursement which you have not paid yet).

I would also double check anything else that the solicitor should have done, just to be sure - if it was just the one screw up, then that would probably be fine, but the fact that they seem to have made 2 separate mistakes on the same file suggests to me that there may be more hiding in the woodwork.

It does seem odd, doesn't it? I think I'll just call the HMRC helpdesk and go over the broad outline of it with them to be sure, too.

I didn't at the time (a couple of months ago) understand how I could be expected to sign a form to authorise payment from HMRC to solicitor without having been part of or privy to the details of the payment in the first place!

Thanks DumbMuscle

glentoran99

Bossypants wrote: »

It's an unfortunate situation but I'm afraid you will have to pay it, just like you would expect HMRC to return the money if you had overpaid.

Having said that, given that it's a solicitor error and they have already made mistakes on your file, I think it's reasonable to tell them that you don't have the money to hand and ask to work out a payment plan with them.

Separately, it might also be worth looking into whether you can afford to start putting a little something into an emergency fund once a month. £1200 is a substantial sum, but it's also not that much in the greater scheme of homeownership. What will you do if the boiler breaks down? If there is a gas leak or flooding and you suddenly need to take the family elsewhere for the night? Etc.

House insurance?

csgohan4

glentoran99 wrote: »

House insurance?

Doesn't cover things that has happened over time though like a pipe leak. You may still pay excess and premiums going up etc. But boiler definitely a big cost

Mel_Wood

Just spoken with the HMRC helpdesk, to check their understanding of it is the same as I'm being told by solicitor...

It pretty much checks out. Solicitor did pay £800 then another £800 in error, before being told the actual total was £2,000 so still underpaid.

The HMRC won't return the second £800 until the situation is more clear, and when the £2,000 is paid in full there will be two years worth of interest to be charged.

At the very least I'll argue strongly that the solicitor should cover the interest, given that the delay in payment was only caused by solicitors' mistake?

AdrianC

Mel_Wood wrote: »

Just spoken with the HMRC helpdesk, to check their understanding of it is the same as I'm being told by solicitor...

It pretty much checks out. Solicitor did pay £800 then another £800 in error, before being told the actual total was £2,000 so still underpaid.

The HMRC won't return the second £800 until the situation is more clear, and when the £2,000 is paid in full there will be two years worth of interest to be charged.

At the very least I'll argue strongly that the solicitor should cover the interest, given that the delay in payment was only caused by solicitors' mistake?

So as has been said - you owe HMRC £400, because £1,600 has been paid by the solicitor to your account. You owe the solicitor £800, because they've already paid £1,600 but you've only paid them £800.

I'd say the solicitor covering the interest and any penalties is absolutely fair enough - up until the point you're made aware of it. After that point, the ball is in your court. Whether you can persuade them to make some other goodwill gesture towards those costs, either directly or by offsetting them against your £800 debt to them, is another question.

Surely you realised that you were massively underpaying the SDLT, given the change to the more expensive property?