The government's rush to implement the SDLT resulted in a lack of time for proper negotiations between the Law Society and Inland Revenue. This has caused a number of problems for practitioners, says Denis Cameron

The Law Society's tax law committee and conveyancing and land law committee established a joint working group to negotiate with the Inland Revenue on the proposed introduction of the stamp duty land tax (SDLT) as long ago as the autumn of 2002, but the meetings were stopped at the request of the government at the beginning of 2003. Therefore, it came as a surprise in the late spring of 2003 when the government announced, not only that SDLT would be introduced, but it would happen as early as 1 December. There were barely six months within which to negotiate.


The meetings recommenced in the early summer of 2003, but the working group found itself presented with a fait accompli so far as most aspects of the SDLT were concerned. The most important of these was the main form that we all know now as the SDLT1. The present form is not very different to the original, which the working group saw that summer. It was made clear to us that, in the timescale available, no major changes could, or would, be countenanced.


However, what became immediately apparent to the working group was that the Inland Revenue had not properly considered the difficulties caused by having to enter the effective date of the transaction on the form. There was no objection on the part of the working group to the concept of the purchaser signing the form. By so doing, the purchaser was now taking responsibility for its contents rather than the solicitor. The problem is, of course, that the form has to be signed before completion by the purchaser and that is essential when a lender is involved. At that point, the effective date can only be rarely known with certainty.


By the beginning of September 2003, it had become obvious to the working group that as much progress as possible had been achieved in the time available. A pragmatic decision was made to assist the Inland Revenue in preparing the profession for the implementation on 1 December.


The SDLT forms are, to a certain extent, another government information collection exercise. The way that the forms are set out has everything to do with the information being read, collated and stored electronically and, no doubt, shared with other organs of government.


The Inland Revenue operated what it called 'a light touch' until July of last year. It is true that this did help practitioners but, equally, it helped the Revenue too because its scanning equipment was not operational owing to the hasty implementation of the tax.


Every cloud has a silver lining, and the one so far as SDLT is concerned is the situation regarding disadvantaged area relief. This had been introduced under the old stamp duty regime in November 2001.


Errors that were made are now starting to surface, particularly when properties where relief was not claimed when it should have been are now resold. This is because there was a considerable lack of knowledge about the relief for the first 12 months or so after implementation and it was not easy to ascertain whether or not a property was in a disadvantaged area. Under the old stamp duty regime, reclaim for overpayment must be made not later than two years from the date of original payment.



Therefore, the first date when errors started not to be capable of reclaim was November 2003. The Inland Revenue has no flexibility in allowing claims outside the period. The improvement with SDLT is that the claim period will be six years. In addition, there is now a Revenue Web site postcode search (see: www.inlandrevenue.gov.uk/so/pcode_search.htm). From the spring of this year, the Revenue will be picking up postcode data from SDLT1s and inviting a claim for a relief if it has not been claimed.



Over the last Christmas break, the Inland Revenue has distributed a new CD Rom to solicitors to enable completion of SDLT returns more easily and effectively. The forms can be completed without guidance notes. There are easy-to-use drop-downs and non-applicable sections blank out automatically. If a box is missed, the form cannot be printed until it is completed.


The problem of the effective date at box 4 still remains with this CD-rom product. The form can be completed without an effective date and signed by the purchaser before completion but that is only an 'agent's copy' and the Inland Revenue says it cannot be submitted to it. Following completion, the saved form has the effective date inserted and then is copied off for the solicitor to sign as an 'agent' confirming the effective date and that the solicitor holds an 'agent's copy' signed by the purchasers. The alternative is that the form can be fully completed including the effective date and signed by the purchasers, but this can only be done with certainty after the completion date and that is not acceptable where a lender is involved.


This solution is wholly unsatisfactory. Firstly, solicitors are having to print twice, and in any reasonably busy practice it will not be easy to marry up saved SDLT1s to individual clients as they are only stored on the CD-rom by reference to pay slip numbers. Secondly, the procedure defeats the whole object of not having solicitors routinely signing their clients' returns.


A better solution must be found and meetings will continue to take place until it is. In the meantime, solicitors can either print off the 'agent's copy' form and cross out those words and then write in the effective date post completion, or they can print out a form with an effective date inserted which, after exchange of contracts can be more than a guess, and if the date subsequently changes simply alter it in ink. The disadvantage with both these methods is that the form will not be capable of being scanned if there is any writing in ink and therefore, there will be a little delay in obtaining the SDLT5.


The act of scanning is in itself now causing increasing problems. It is hardly surprising that the scanners are not always reading handwritten forms with any consistency. Solicitors are now starting to receive requisitions in form SDLT8.


Unfortunately, the Law Society was not consulted about this form. The Inland Revenue is sending it to the purchasers as well as to their solicitors and requesting that the purchasers sign it. This raises the same problem as to the duties that solicitors owe to lenders. Mandatory post-completion signatures by purchasers are simply not acceptable and the Revenue will have to concede this. It is even more galling, though, when a requisition is raised as a result of a scanning error on the Revenue's own machines.


The SDLT is causing, and will continue to cause, problems for practitioners. It was introduced without enough thought and consultation and regrettably this continues.


Denis Cameron is a Law Society Council member and chairman of Chancery Lane's conveyancing and land law committee