SDLT avoidance schemes – are they breaking the rules?

The Law Society Gazette has reported that conveyancing solicitors are being pressured into becoming involved in Stamp Duty Land Tax (SDLT) avoidance schemes, costing the tax payer around £35m.
In order to protect solicitors and to help them challenge any requests from Clients or third parties HMRC has issued a guidance note, outlining a number of ineffective schemes.  Click here to view the guidance note.
HMRC have recently conducted an exercise to determine the scale of the problem and has compared data held by the Land Registry with SDLT returns.  This has revealed that approximately 1,200 people have not paid the right amount of tax due on their property transactions.
New tax assessments are being sent to the individuals where marketed avoidance schemes have been employed to artificially reduce the tax payable on the property transactions.
Warren Gordon, a member of the Law Society’s conveyancing and land law committee, said:
‘There was a general feeling that practitioners were being pressured by third parties and clients to become involved in schemes that they felt were not legitimate, otherwise they may lose the conveyancing work.
Many felt they didn’t have the ammunition to challenge the requests. They will now be able to point to this guidance to show that HMRC has given notice that the schemes do not work and will be challenged by them, and those seeking to bend the rules will be pursued and may have to pay penalties,’
Warren added: ‘The note is there to help protect solicitors who feel pressured to become involved in the schemes.’
Today’s Conveyancer spoke to a fee earner, who wished to remain anonymous, and asked the following questions:
When you were doing the work did you feel it was ethical to do it?
No.  I didn’t like working on these files, fortunately I didn’t have to deal with many of them.  They were a little more complicated than a normal transaction so they were dealt with by more senior fee earners.
Do you think the partners in the firm felt it was ethical?
To be honest I don’t know.  I hope that they didn’t feel it was ethical and it was purely because they were pressured into it by other parties.  With the current climate I could sort of understand why they felt that they had to agree to it at that time but that still doesn’t excuse it.
Would you do it now?
No, I think I would refuse even if it meant losing my job.  The chances are that HMRC are going to come looking for anyone trying to bend the rules a bit and as a fee earner I don’t really want to be the one to get the blame.
What did the clients seem to think about it all?
The Clients thought it was brilliant.  They got a reduced Stamp Duty amount, what could be better than getting one over on the tax man?  They paid quite a large fee to the third party but that was covered well within the savings they had made on the Stamp Duty.
We are sure there are many legitimate schemes where firms operate within the rules however there are also many than don’t.  What are your thoughts are you happy to do this work?
Today’s Conveyancer, bringing you the latest conveyancing news and updates.
Today's Conveyancer