The Stamp Duty Paradox – Why Compass isn’t a tool for occasional use.

June 7, 2023


As the Compass client base grows, we’ve become aware of a small but perplexing issue with regards to some firms use of it. Namely that they see it as a tool to be pulled out ‘just for the complex cases’ and that the rest of the time they can manage without it. This invites trouble – ironically the exact sort of trouble Compass was designed to help firms avoid.

The Basics

Compass was designed to solve a very specific problem in the conveyancing space – the complexity and confusion which tend to surround SDLT calculation. At first, part of the challenge we faced in getting that message out to firms was simply a lack of acknowledgment that there even was a problem. SDLT was assumed to be straightforward, and after several years of combined badgering from the SRA and HMRC, most firms didn’t want to hear anything about SDLT at all. HMRC had given them a calculator and that was enough.

Once the message started to filter through that issues did indeed exist, we faced a new challenge – the assumption that only extremely complex transactions required the use of a system like Compass and/or outside consultation with tax experts.

The Paradox

The issue is that cases which are ‘complex’ for the purposes of accurate SDLT calculation aren’t always obvious. Factors which may influence the final SDLT liability include the habitability of the property, the amount and use of land attached to it, the status of the buyer and several more. Some of this may be information that is either unintentionally withheld by the client or missed as unimportant or irrelevant by the selling agent or vendor.

Compass’ comprehensive step by step process of detailed questions is designed specifically to catch all such nuances in a transaction, to ensure that an accurate calculation is made. Therefore, if solicitors assume they can just pick out ‘the problem cases’ they’re missing the point, and almost certainly much more besides.

The Facts

Currently, 50 reliefs, exceptions and surcharges exist in the SDLT legislation, and history suggests that more will appear over time. Indeed, it’s likely that further adjustments are on the way at the next budget.

SDLT is a complex tax, which is technically self-assessed but which in practical terms is an area in which clients rely on the expertise and advice of their solicitor. Unless that solicitor is part of a firm with a dedicated tax department, it’s unlikely they’ll be abreast enough of the full and up to date breadth of the legislation to provide that advice accurately.

HMRC’s calculator is vastly simpler and not designed to catch the majority of the situations that Compass will. By electing to use Compass only on ‘obvious’ cases and the HMRC calculator for everything else, a firm is running the risk of missing the exact sort of issues Compass was designed to help them catch.

The Client

We all know that clients don’t like charges. Disbursements, search fees – there’s always something a client may want to quibble on a bill. So it’s entirely likely that some clients will initially push back against the idea of an additional fee relating to Compass. Two things are worth bearing in mind here.

First, it’s your firm’s name on the submission. Per the above, regardless of whether or not your firm is actually providing advice on the SDLT aspect of a transaction, the perception is very much that it’s down to your responsibility. Why would you wish to put your name and risk yours and your firm’s professional reputation to a document that you’re not 100% satisfied is correct?

Second, it’s worth pointing out to clients that use of Compass is designed to protect and benefit them as much as you. Access to affordable and expert tax advice, a third party guarantee that the right SDLT figure has been calculated, and documented proof of the same. Compared to the modest additional fee they pay, that sort of peace of mind seems a bargain.

The Benefits

Use of Compass for every conveyancing case will quickly enable it to become a smooth part of your conveyancing process.

Removes the necessity of writing a confusing, ineffective, and (to clients) contradictory disclaimer into your fee agreement.

It will protect your firm from the possibility of retrospective claims from clients and/or their agents for overpaid SDLT or penalties and interest resulting from underassessment of SDLT.

Our experience demonstrates that use of Compass actually contributes to a reduction in PII premiums at renewal. Conveyancing is one of the higher risk fields for PII calculation purposes, and elimination of SDLT errors by using Compass significantly reduces that risk.

The Conclusion

You can’t be a little bit pregnant, the old adage tells us. So it is with Compass – you’re either in or out, there’s no halfway if you want it to do what it’s designed for. Used properly for each and every case, it will provide total protection for your firm with regards to SDLT. Used on an ad-hoc basis, it will leave you open to the same exact dangers and pitfalls you’d face without using it at all.

"If your solicitor isn’t using it already, it might be time to change solicitors. Get in touch today!"