Firm’s involvement in SDLT avoidance schemes results in regulator fine
A firm has been fined by the Solicitors Regulation Authority (SRA) after helping clients avoid stamp duty in over 200 conveyancing transactions.
A notice on the regulator’s website states that during April 2009 and January 2011, Simpson Millar had taken part in a stamp duty land tax (SDLT) scheme in order to avoid payment. This equates to the non-payment of approximately £4.57 million.
In exchange for preparing the relevant documents and implementing the scheme, the firm also received further funds totalling around £350,000 from clients and promoters.
One scheme used by the firm, known as the ‘husband and wife’ scheme was used 144 times and involved two contracts being made. The property would be sold to a single individual, before being sub-sold to another individual at a lower sum.
According to the regulator, the firm also took part in another scheme, where a special purpose vehicle would be set up by purchasers, where the specific purpose was to buy the property. Holding control of this company, the buyers would be the sole shareholders; following the completion of the transaction, this would be closed, with the property being transferred to the shareholders.
The main aim of these schemes, as stated by the regulator, was to enable the buyer to either minimise the payment of SDLT or avoid it altogether. The use of the schemes follows a warning from HM Revenue & customs regarding their legitimacy.
In 208 of the transactions, the firm also acted as the mortgage providers, being found to not have told lenders that the schemes were being used. In light of this, the SRA stated that Simpson Millar acted where there was a conflict of interest.
Simpson Millar stated that it stopped accepting instructions for the schemes in July 2010 after an internal reassessment. It described the payments it had received from promoters as “modest”, and had not been treated as commission, but rather money for services.
Throughout the duration of the investigation which lasted six months, the firm fully cooperated with the regulator, admitting to the failure to act in the best interests of many clients.
As part of a regulatory settlement agreement, the firm received a fine of £2,000 from the SRA and will pay costs of £12,950.