Monday, 30 November 2015

Are you prepared for the Stamp Duty changes?

In his Autumn Statement this week, the Chancellor announced a 3 percentage point surcharge on stamp duty land tax (SDLT) for people buying a buy-to-let or second home from April 2016.  For example, on a home worth £275,000, SDLT would rise to £12,000 from £3,750. A significant jump. 

Below are some of the common questions raised along with some guidance though please do note that the legislation has yet to be implemented, and that there could be changes made to the proposals during the consultation process.  It is therefore important not to rely on this guidance without first checking with your conveyancer. 

Are there any exemptions?

The change will not apply to buyers of caravans, mobile homes or houseboats, nor, subject to a consultation, to companies or institutions owning more than fifteen residential properties.

When will this all happen?

1st April 2016

On what value of purchase will it apply?

Treasury documents released immediately after the speech suggested  that the first £40,000 would be tax free. It was however later confirmed that while purchasers who buy a property below £40,000 won’t have to pay the additional 3%, for all purchases above that, the 3% extra tax applies on the entire price. Currently, the rate for stamp duty is 0% on properties up to £125,000, then 2% on any sums over and above £125,000 to £250,000. Properties sold at £250,000 to £925,000 pay 5%, then it is 10% above that. These rates remain the same for standard residential buyers though 3% extra will be added if the property is to be used as a buy-to-let or second home.

If I have already exchanged contracts before the changes were announced will I be affected ?

If you have exchanged contracts on a property caught by these changes before the announcement was made,  but completion is on notice and there is a possibility you will complete after 1st April 2016, my view, having regard to how previous changes have been introduced, that  the increased surcharge is unlikely to apply. 

If I have exchanged contacts after the announcement but are due to complete the transaction after 1st April 2916 will I be required to pay the extra tax?

Probably yes, though there may be ways of avoiding this if you are able to gain possession of the property under license before completion, though do remember that if you are looking to do this there is a requirement to pay the Stamp duty within 30 days.  

There are other options  including the payment of 90% of the purchase price before the deadline or making the consideration partly rent and partly premium, and paying some rent before April.   The best advice is to speak with your conveyancer and seek advice. 

If I am thinking of purchasing a buy to let or second home what do I need to do to ensure that I do not have to pay the extra tax?

Putting it simply make sure you complete the transaction before the 1st April 2016. 

Think also about setting up a corporate vehicle to purchase the property.   Your solicitor or accountant will be able to advise you on what this involves.   Do keep in mind that if you have a property portfolio in your own name and are looking to transfer the ownership of existing properties into a limited company do ensure this is done before the 1st April 2016 otherwise the surcharge will apply to those transactions.  There could also be capital gain tax implications on which advice should be sought. 

Can I purchase the second home or buy to let in my husband or partners name?

I would not advise this as an option as I am sure the Revenue will be alert to this and make sure there is no gap in the legislation to allow this to happen.  There already exists legislation around 'connected persons' and I anticipate this will  be expanded upon to make sure this glaring and obvious situation does not become a loophole.  

What effect is this likely to have on the market?

This together with the recently announced changes to tax relief will make buy to let to the amateur landlord less attractive.  This could cause a shortage of rental properties and may lead to existing landlords pushing up rent.  Developers may also reign back on new builds if the demand for buy to let is no longer high. 

It could also lead to landlords offering to pay less for buy to rent properties and have the effect of making investment property cheaper. This my have been one of the intentions behind the change. 

It is likely that we will see a surge of purchases of this type of property before the deadline and this could in the interim force prices up if there is a mad rush

What should I expect from my conveyancer?

If there is a rush your conveyancer may find it difficult to cope with the large number of cases and may decide in an effort to control the large flow of work to increase fees for this type of work. I read recently that it is estimated as many as  50,000 buy to let transactions could be rushed through before the deadline. 

Clearly it is important to make sure your conveyancer is aware of the purpose of the transaction  and the need to complete before 1st April next. Your conveyancer may be reluctant to give a guarantee and require you to pay the fee irrespective of whether it completes in time. 

Where are the grey areas?

What is the position when a spouse or cohabiter breaks up with a partner and still has an interest in the jointly owned property.  Does the purchase of alternative accommodation count as a second home. Likewise where a property is purchased due to short term relocation for work where the existing property has yet to be sold. 

Hopefully the details will be ironed out once the consultation process is concluded and the legislation is passed.  Until then all you do is to work with what is known and to keep the deadline of the 1st April firmly in mind. 

MJP Conveyancing are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877067 or via email at david@mjpconveyancing.com

Sunday, 15 November 2015

When is a bogus legal firm not a bogus legal firm?

We operate in a world in which we are constantly exposed to criminal activity undertaken by sophisticated crime syndicates, normally based outside the country.   There are several different types of crime and the type of scam is constantly evolving.  There is a need for both professionals and consumers to be on guard and to be educated to spot the true scam attempts and to know what to do when one is identified. 

A scam is a type of fraud that criminals use to trick both professionals and the consumer  into giving up money and personal details. Sometimes criminals will use the names of law firms, solicitors or other individuals regulated by us to make their scam seem genuine, either with or without their knowledge.

Scams can take the form of unsolicited emails, text messages, telephone calls or direct mail. Emails sent can also contain viruses some of which are designed to allow the criminal to gain access to your computer with a view to obtaining personal details of clients, bank details and other confidential information. Alternatively the criminal take control only agreeing to release the captured data in return for a ransom payment. 

One type of email is an email sent from an address which is not specific to the purported sending individual or firm but which purports to be from a member of a legitimate legal firm.  Its this particular email which seems prevalent and which is now proving to be a daily occurrence.  All one needs to do is to look at the Solicitor Regulation Authority Scam Alert Register to see how many of these are happening each week.  

My question is that should this type of email, which is not by any means a sophisticated scam, be viewed as one which is reportable and allowed by some independent third party holders of this data, to suggest or imply that the ‘victim’ business may have in some way brought about the scam or is associated with it. 

I say this is not a sophisticated 'scam' because to create an email address and to then add a simple signature strip to pretend the email has come from a particular legal practice does not involve very much ingenuity. It takes no longer than a a couple of minutes and to be able to send this out to other lawyers involves nothing other than a perusal of Find a Solicitor website.  As I say not rocket science. 

I have first hand knowledge of this since my business was reported to the SRA and has also as a result of the incident, had a “notice’ added alongside our name on a data base held by a well known commercial solicitor checking service. 

The email had an attachment  and was sent to a number of legal firms and was sent not from a clone of our business email address but rather from a personal email address.  This was very clear and all that the email had which related to our business was the name of our business in a typed signature strip.   The email was clearly a fake and unless the professional person receiving it has lived on a different planet  for the past year or so, it should have been abundantly clear that the email was ‘spam’ at the very least, and should be deleted. 

Our only connection to the email was the use of our name within the body of the email. 

Notwithstanding this we were required to report it the SRA and as mentioned anyone searching our name on the SRA website and the third party database will see that we are associated with what should have been labelled 'spam' rather than 'scam'. 

Not happy with this, we lodged a complaint with the SRA and wrote to the third party verifier.  Despite these efforts we still have the 'scam' associated with our business and this has meant that from time to time we are required to defend ourselves when other businesses  contact us enquiring about what happened and making sure we were in no way involved in the 'scam'. 

My question is that should all types of spam be regarded as reportable, or is it reasonable to expect most lawyers, using both common sense and a degree of intelligence, to differentiate between a poor and pitiful effort to 'scam', as was the case here, and the more serious type of scam.   Is there not a fear that by reporting everything that might look to be a scam ( whether it is or not ) the real and more damaging scam will become less visible to detect?

The argument advanced from the third party verifier is that ‘sadly not everyone spots the obvious and people are conned by emails purporting to be from legitimate firms when they are not’.

It also claims that the credibility of those businesses who appear to have been held ‘guilty’ for no reason other than association has not been affected by this type of scam.  Its also argued that if someone purports to be you then you have a moral if not professional duty to warn your clients and other firms to ensure that they are not misled by criminals.

Fair points.  However, the email in question was not directed at the consumer, it was an email which was being sent purportedly on behalf of our business from an email address which did not even feature our business name within it.   The ‘red flag’ points within the email were clear and obvious. If the email address was a clone of our email address then yes we would have had a moral and professional duty to warn, but this was not the case. 

Surely after all of the publicity and professional guidance issued over the past year or two,  has the time not come for the SRA and commercial scam data base holders and publishers to be more discerning in the reporting and labelling of scam attempts.   On this note, the third party company has refused to remove the notice registered against our name or to put an explanatory note against it. 

By having this blot on our copy book through no fault of our own we do face the prospect of suffering damage to our reputation due to risk of other businesses dealing with us taking the view that we have been the subject of a genuine ‘bogus solicitor' attack when clearly we have not.  I raised this with the third party data collector and publisher and was told this was nonsense.  I have not take this any further but it would be interesting to take an opinion on whether the publisher of data which is capable of giving a misleading image of a business can be held accountable for any loss arising. 

Hopefully those reading this will not consider that I am looking to undermine the fight against fraud.  On the contrary  I am saying that unless we can when receiving data be able to filter and correctly categorise the incidents there is a real danger that the profession will start to switch off to the threat due to the the overwhelming number of reports and warnings issued. 

David Pett   

MJP Conveyancing are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877067 or via email at davidp@mjpconveyancing.com