Simpson Millar fined for part in £4.5m stamp duty avoidance

A national firm that helped clients avoid stamp duty in more than 230 conveyancing transactions has been fined by the regulator for its part in the schemes.

According to a notice posted by the Solicitors Regulation Authority, Simpson Millar undertook the transactions between April 2009 and January 2011 where clients had been party to a stamp duty land tax scheme to avoid paying. This initially resulted in the non-payment of at least £4.57m to HM Revenue and Customs.

In addition to its usual conveyancing fee, the firm received around £350,000 in total from promoters and clients for implementing the scheme and preparing documents to enable avoidance.

The firm implemented the ‘husband and wife’ scheme in 154 transactions, where two contracts were executed and the property sold to a single individual and then a sub-sale was made at lower value to another individual.

In another scheme, used 44 times by Simpson Millar clients, purchasers would set up a special purpose vehicle whose specific purpose was to buy the property. The buyers would be the sole shareholders with control of the company, then once the transaction was complete they wound up the company and the property would be transferred to the shareholders as a distribution of assets, and the deal therefore not subject to SDLT.

The SRA said the principal aim was not only to oversee the transaction but also to enable the purchaser client to either avoid or minimise paying tax. This was despite HMRC issuing warnings in 2007 and 2010 about the legitimacy of these schemes.

Simpson Millar also acted for the mortgage provider in 208 of the matters,and was found to have failed to tell these lenders that buyers were using the SDLT schemes. The SRA said the firm acted where there was a conflict between the interest of the lenders and buyers in these transactions.

In mitigation, the firm said it accepted instructions for such schemes for only 10 months, ending the practice in July 2010. The decision to stop was made following an internal reassessment .  Payments received from the promoters of the schemes were ‘modest’ and constituted less than 1% of the firm’s revenues. Such payments were treated as money for services rendered and not as commission.

The firm fully cooperated with the SRA over a six-year period since the investigation began in July 2011 and now admitted to failing to act in the best interests of lender or purchaser clients, acting in transactions where there was a conflict or risk of one, and failing to keep accounting records properly written up.

The SRA fined the firm £2,000 as part of a regulatory settlement agreement. Simpson Millar will pay the £12,950 costs.

Kindly shared by The Law Society Gazette