The Financial Ombudsman Service (FOS) has ordered Advance Mortgage Funding to compensate a couple after it gave incorrect advice on Stamp Duty Land Tax (SDLT), which resulted in them having to find an additional £30,000.
Prior to the purchase of their new home the couple concerned had asked their broker whether they would need to pay the higher rate of SDLT payable on second homes. The broker advised that he had checked with a solicitor and that higher SDLT would not be due provided it was clear that Mr A’s main residence was Mr B’s current home, and recommended that they put Mr A on the electoral roll at Mr B’s address and record it as the address for his bank account.
After exchanging contracts on their new home, their solicitor informed them they would need to pay the higher stamp duty rate, by which point they were contractually-bound to complete.
The pair needed to find an additional £30,000 in time for completion and had to increase the mortgage to one with a higher interest rate.
Advance said its broker was not acting as a tax adviser but just passing on information, and that it was up to the couple’s solicitor to advise them on the SDLT liability. However, the FOS decided that the broker gave the impression he was giving advice on SDLT, and ordered Advance to pay the couple a lump sum to cover the lifetime interest they will pay on the extra £25,000 they borrowed, plus £750 compensation for their time, trouble and upset.
In the decision, the Ombudsman said: “There’d be no reason for the couple to ask elsewhere for advice on SDLT; as far as they were concerned, they’d already asked and been told what they needed to know.…”
Registering on the electoral roll and changing the address on a bank account are not actions that would allow Mr A to meet the test of Mr B’s property being his main residence under the rules on SDLT.
This case highlights two things for us:
- SDLT can be complex, particularly when it comes to claiming reliefs.
- Solicitors generally perform no more than a reporting role when it comes to SDLT, and property purchasers rely on others to ensure the related tax cost is minimised.
If you would like reliable assistance on SDLT, or any other aspects of tax planning, speak to an expert in our Private Client Team on 01788 539000.