Conveyancers: SDLT Multiple Dwellings Relief Webinar: Watch on Demand
Our recent webinar focusses on Multiple Dwellings Relief. Joe Eizenberg, Partner at Beale & Co and Jack Steer, Barrister at Hailsham Chambers discuss the potential issues and pitfalls facing conveyancers as well as outlining recent court cases in respect to claims in this regard.
Joe Eizenberg provides an overview of the SDLT Multiple Dwellings Relief claims currently affecting conveyancers. Many conveyancing practices will have seen a recent increase in queries from clients surrounding this potential tax relief or claims being advanced against them where it is alleged that there has been an overpayment of SDLT due to a failure to advise on the availability of MDR at the time of purchase.
These claims can be troublesome for a number of reasons and Beale & Co consider the basics of MDR claims, how insurers approach these and what firms can do to protect themselves going forwards.
Jack Steer provides an interesting insight into how such claims are considered in the Courts.
Agenda of discussion topics:
- Multiple Dwellings Relief - what is it and why has there been a recent surge in claims against conveyancers from it?
- How to bring and defend a professional negligence claim - what does a claimant need to prove to recover damages?
- How do professional indemnity insurers approach such claims?
- How are Multiple Dwelling Relief claims argued and how are they defended?
- Stories from the Court - What defences work/don't work?
Questions and Answers
Please see below the recording, answers to questions raised during the session.
Questions and Answers
Q: Is it correct that retrospective relief can be claimed?
Yes – if MDR is not claimed on the original SDLT return it can be reclaimed from HMRC up to 12 months later. There is a discretion for claims outside this period but that discretion seems to be very rarely exercised.
Q: If the claim for relief is made at the point of purchase, what evidence needs to be given to HMRC to justify the relief? Is it less onerous than seeking the adjustment after the event?
Strictly speaking, no evidence needs to be submitted to HMRC at the point of purchase. Rather, the conveyancer simply ticks the relief box on the SDLT return and inserts the appropriate code for MDR.
Evidence is required if and when HMRC investigate the relief claimed (which is by no means guaranteed). At this stage HMRC's investigator send a letter with a pro-forma schedule seeking information about the property and its features. Supporting evidence in response to these queries should demonstrate that the dwelling satisfies the MDR rules usually includes floor plans, pictures etc.
The same process applies to seeking retrospective relief.
Q: If the annexe was physically separate with ensuite facilities, would a kettle/microwave/toaster in the living/bedroom space be sufficient to qualify as kitchen facilities?
Probably not. Whilst the guidance from HMRC isn’t specific, we would suggest that HMRC are likely to take a common sense approach to this question and the kind of facilities described above are unlikely to be sufficient.
Given the definition of dwelling for MDR purposes, the annex does need to be “self-sufficient” and cater for a person’s basic living needs. Therefore it is reasonable to expect that a kitchen should include at least basic facilities such as a sink and a hob.
Moreover, if the kitchen facilities of an annexe are not clearly described on a floor plan and/or in the PIF (which is often the only information available to a conveyancer), it is difficult to see how a reasonably competent conveyancer could be expected to conclude that such facilities were present. This is an important factor in defending any allegation of breach of duty.
Q: Many of the claims that have gone to trial have been heard in the County Court which I understand is not binding on other Courts. Does that make these claims more difficult to defend as there’s limited precedent judgments to follow?
A favourable High Court judgment would help, but that can cut both ways. If a judgment was unfavourable for conveyancers it could also make the claims more difficult to defend/settle.
It would certainly be helpful to have binding authority on some of the issues that arise in these claims (i.e a decision of the High Court or higher). However, some assistance can still be cleaned from the County Court judgments, as they are at least helpful in demonstrating how other County Courts have determined these issues.
Given that there are so many cases in which County Courts have determined in the Defendants' favour the question of the reasonably competent conveyancer's knowledge of MDR pre-2016, these cases go some way to showing that the Defendants' arguments in this regard are persuasive.
Q: Is the argument that the conveyancer would not have owed a duty on transactions pre 2016 a good enough standalone argument?
On all but the most extreme facts, yes but each case is fact specific so it’s not a guarantee.
Q: “I have often thought the Courts have placed a high professional burden on solicitors in terms of what they should have done/known, perhaps because of the availability of PI insurance to compensate claimants. Given the success Jack has had in arguing that defendants would not have been expected to know about the availability of the relief, has there been a move away from that or is this exceptional for this area?”
This was specifically a factor in the Dreamvar case where the fact that a firm of solicitors had insurers was something that the Court of Appeal took into account when refusing relief for a claim based upon breach of trust. However, that was very specific to breach of trust claims. More generally, whilst solicitors are held to a high standard, I don’t think it is because they are insured.
For my part, I am not convinced that this plays much of part in the Courts' approach to imposing liability, save at a very high level in very particular cases (see for instance cases in respect of vicarious liability for sexual/physical abuse). Indeed, there have been a number of authorities in which the court has distanced itself from the idea that the availability of insurance ought to be a paramount consideration when determining liability.
I certainly do not consider that this has been a consideration in the MDR claims that have been decided at County Court level.