If a property is near a nuclear power plant, built above an old coal mine or is subject to repeated flooding, the implications are easy enough to see. It arguably makes sense to outsource obtaining this information to a dedicated external provider who can take a simple admin task off your firm’s hands and increase efficiency.

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What surprises me is why firms who have made this cost/benefit calculation haven’t applied the same logic to Stamp Duty.

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Though many mortgage lenders will insist on certain searches being carried out, there is no actual general legal requirement to undertake them. As important as they can be for the purchaser, and as many liabilities and pitfalls as they can prevent for your client, no legislation exists enforcing them, and yet they are as intrinsic to the process of every conveyancer as AML and ID verification.

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And then there’s Stamp Duty.

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The Conveyancing Code. The Law Society Conveyancing Quality Scheme. Lenders. The SRA. All these and more heap requirement after requirement onto firms when it comes to Stamp Duty. You must demonstrate how you arrived at the figure, provide an audit trail for that process, highlight any potential issues, and ensure a completed return is submitted correctly and in a timely fashion. The penalties involved for failure in any of these aspects can be severe, whether regulatory or otherwise. Fines, dissatisfied clients, loss of the CQS mark and increasing PII premiums to name a few.

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Yet most firms still deal with Stamp Duty internally.

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If you’re a larger firm with a dedicated tax department, this can make sense, though I would still argue that stamp duty matters are not referred to tax departments with anywhere near enough regularity. But for the majority of small to medium-sized firms, this is an even greater risk. With the variety of exemptions in the legislation, the lack of clear guidance from HMRC and ever-shifting rules, Stamp Duty is one of the most complex issues in the conveyancing process. You can’t avoid it, and you absolutely cannot afford to not fulfil all of your statutory and regulatory obligations around it.

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But every time you deal with it internally, you’re opening your firm up to risk.

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Which brings me to This reaffirms my point with regards to outsourcing the Stamp Duty calculation.

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This is what I call the Stamp Duty Mystery – why are firms, who routinely outsource mundanities like local searches, still dealing with the hot potato of SDLT themselves? Have you stopped to ever question why as a firm you pay to outsource one fundamental part of the conveyancing role and not the other?

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Two answers present themselves, and neither seems good logical to me.

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Firstly, firms may simply not be aware of the dangers. In my experience, all too often solicitors assume SDLT is a simple admin function. Check the tables, compare to the purchase price or stick the numbers in the online HMRC calculator. Many simply leave the task as part of the admin for their secretaries or processing teams. Assuming that because it shares the same name as the old Stamp Duty then it must be basically the same, they fall into the trap of underestimating how much trouble SDLT can cause them when dealt with poorly. In an environment where clients are increasingly litigious and costs everywhere – including PII – are rising sharply, this seems borderline reckless to me.

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The second possibility is that firms simply aren’t aware that third party SDLT services are available. They assume that HMRC’s own calculator is the ‘only game in town’ and therefore use it as the default. Third party providers like Compass may be relatively recent developments, but surely any firm alive to the very real issues around SDLT should be proactively looking for solutions to do better? Several times in the last few years the CQS has been updated with regards to SDLT – any responsible firm which wishes to retain their accreditation under the scheme must be assessing how to best achieve this?

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Not so much, in my experience.

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They’ll pay for third parties to do drainage searches, local authority searches and more, often at a price equal to or more than it would cost to do directly, but they’ll happily take the risk of SDLT calculation on themselves. This seems odd to me, to say the least.

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It gets odder when you consider that Compass is a third party system rather than a third party provider. Once trained, your staff will operate it and as your client’s answer the questions within our Client Portal, the role of the Conveyancer is simply to validate the answers, or a sanity check, if you like. It sits on your own server or CMS. You have control over how long it will take. You have access to all the relevant information instantly. In the rare cases where further input is required from a specialist adviser, this will occur within hours rather than weeks.

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It really is a has been labelled a no-brainer by our Compass user law firms.

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Perhaps the mystery isn’t why firms don’t use third party SDLT support, but why it took so long for anyone to realise that it might be necessary. SDLT is now 20 years old. In that time, millions of transactions have been undertaken, and far more are likely to have involved incorrect SDLT calculation than errors in search result interpretation, with potentially far more devastating financial consequences for both clients and firms. We estimate up to 30% of stamp duty calculations are incorrect.

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At any rate, now that the solution is here and so easily accessible, can your firm really afford not to utilise it and outsource one of your biggest risks?