A law firm which helped conveyancing clients avoid paying a total of £1.3m in stamp duty land tax has been penalised by the Solicitors Regulation Authority.
Gloucestershire firm BPE Solicitors LLP agreed to the publication of a regulatory settlement agreement following the regulator’s investigation.
The SRA identified that the firm had acted in 65 conveyancing transactions between July 2007 and May 2012 where clients had been a party to a stamp duty land tax scheme to avoid or mitigate payment.
This resulted in a £1.3m shortfall in payments to HM Revenue and Customs.
The transactions came at a time when HMRC had raised concerns about law firms involved in tax avoidance schemes, and the SRA issued a warning notice urging practitioners to be aware of the dangers of SDLT schemes.
The majority of the schemes (57 transactions) were provided to clients by Cornerstone International Advisory Services Limited, with two other types of scheme provided to clients by Inventive Tax Strategies and iTax Consultancy.
BPE Solicitors charged an extra £27,950 in total in relation to the 65 transactions, in addition to conveyancing fees coming to £101,760. On average clients were charged an extra £390 for facilitating the various schemes.
The firm was also instructed to act for the mortgage provider in addition to the purchaser clients in 49 of the total 65 matters. In just 11 of these transactions were the SDLT schemes disclosed to lenders.
‘The result was that the lender clients were not given material information to enable them to reach an informed decision as to whether to proceed with the mortgage offer or renegotiate terms,’ said the SRA. ‘In failing to disclose material information, the firm failed to act in the best interests of their lender clients.’
The SRA said the firm acted where there was a conflict of interest between the purchaser and lender clients because it owed separate duties to act in the best interests of both.
In mitigation, the firm said it had ceased undertaking any conveyancing transactions involving the use of SDLT schemes in May 2012, with just one transaction undertaken following the SRA warning notice in February 2012.
BPE Solicitors said in 57 transactions the clients were introduced to the firm by the specialist tax partner of a highly reputable regional firm of chartered accountants who advised the firm on regulatory matters. This firm also provided tax advice to lay clients on the schemes.
BPE also undertook its own enquiries by way of due diligence to ascertain the legitimacy of the schemes, including advice from the chartered accountants and from the tax counsel.
The firm accepted that it failed to disclose material information to lender clients and in doing so failed to provide a good/proper standard of service.
It agreed to pay a £2,000 penalty and a further £7,500 in prosecution costs.