Sampson: better for firms to be subject of enforcement action
The Legal Ombudsman (LeO) has suggested that conveyancers, rather than clients, should answer to HMRC when stamp duty payments fail to arrive.
“It does seem to us to be unreasonable that if the client has paid the money in good faith for it to be paid to the Revenue, the Revenue then pursues the client,” Adam Sampson, chief ombudsman, told Legal Futures.
He was speaking as LeO published a report today showing that the number of complaints received about residential conveyancing had risen from 1,189 in 2012-13, to 1,476 in the last financial year.
LeO cannot, for the time being, say how many of these complaints relate to stamp duty, but a report for the Solicitors Regulation Authority by the consultancy Economics Insight indicated that more than half the conveyancing claims paid by the Solicitors Compensation Fund so far this year related to it.
Mr Sampson said failures by law firms to pay stamp duty could leave clients having to pay double, while lawyers remained untouched.
“It would be better if, where the Revenue has received reasonable evidence that the money has been received by the law firm, the firm itself is the subject of the enforcement action.
“Even though the compensation fund may end up covering the loss, the Revenue may not wait that long, and clients will have to finance additional stamp duty payments.”
In its report on complaints relating to stamp duty, LeO recommended that payments were made within HMRC’s 30-day time limit, for the correct amount.
LeO said complaints should be taken seriously, and dealt with as quickly as possible, and there should be better signposting for consumers to the correct compensation fund or indemnity insurer.
Mr Sampson said LeO wanted to act as the “canary in the cage” on stamp duty and would monitor the issue closely before suggesting any further changes.
In its report, LeO said: “The consequences can be severe for law firms too. In all of the case studies included in this report the lawyers ultimately had to pay the outstanding stamp duty, any associated penalties and interest, plus compensation for the distress and inconvenience caused.
“For those still trading it will have inevitably impacted on their cash flow and reputation, particularly those firms where we found multiple examples of poor service. And in some cases, following conduct referrals, regulators have also intervened and closed their operations down.”
Mr Sampson said that complaints about conveyancing had dropped, as the housing market dropped, but now, as the market rose, some rise in complaints was inevitable.
“We don’t know what the impact on complaints will be of the financial difficulties of practices or of volume conveyancers,” he said.
“I am concerned that we could end up in a worse situation than we have been in before, if more conveyancing offers are made at low prices.”
LeO said that following the recent increase, one in five complaints now made to the ombudsman were about residential conveyancing, making it the most complained about area of law.
The regions with the highest percentage of complaints about conveyancing lawyers made in the last financial year were London, with 22% and the South East, with 17%.
In a statement, the Council for Licensed Conveyancers said it has been raising this issue for some months with HMRC, the Land Registry and other regulators.
It said: “We are pressing for system-wide changes to help ensure compliance with SDLT payment and are working with HMRC and our regulatory partners to that end. We regard it as best practice for SDLT to be paid at the time of completion.
“Client protection, and the ability to make good losses that clients may have suffered in those few cases when the worst happens, are our priorities. It is important to remember that of the hundreds of thousands of transactions each year, only a very small number will be affected by this but in those cases the impact on individual house buyers is very considerable.”
The LeO is of course right, clients who have paid Stamp Duty in good faith should not be penalised if the conveyancer effectively steals that money.
But surely this is a serious conduct issue, as well as a service one? I can’t understand why LeO is making all the running on this, and not the SRA. The SRA was not evident in a recent BBC TV report on this issue, either.
Perhaps the SRA could explain what it is doing to punish and curb this malpractice?