The Solicitors Regulation Authority (SRA) has fined law firm, BPE Solicitors LLP, £9,500 for helping conveyancing clients avoid paying £1.3m of stamp duty land tax (SDLT)
The SRA found that the firm was involved with 65 conveyancing transactions between July 2007 and May 2012, where clients were part of a SDLT scheme to avoid paying stamp duty.
This resulted in £1.3m of non-payment to HMRC.
The majority (57) of these schemes were provided by Cornerstone International Advisory Services Limited (BVI). Inventive Tax Strategies provided six of the schemes and the remaining two were from iTax Consultancy.
In addition to conveyancing charges, totalling £101,760, the firm also charged £27,950 for providing the SDLT schemes. This was an average fee of £390.
In 49 of the 65 transactions the firm was the mortgage provider in addition to the purchaser client, in 11 of these transactions the SDLT schemes were revealed to the lenders.
Therefore the lender clients did not have all the information to reach a decision as to whether to provide a mortgage offer or to renegotiate.
The SRA said: ‘The firm acted where there was a conflict between the interests of the purchaser and lender clients in those transactions involving a mortgage. A conflict or significant risk of conflict existed between the purchaser and lender clients because the firm owed separate duties to act in the best interests of both the purchaser and lender clients in relation to the same transactions.’
The firm admitted that they failed to disclose material information to lender clients, therefore failed to act in their best interest so did not provide a proper service.
The firm was given a £2,000 penalty and a further £7,500 in prosecution costs to be paid to the SRA.
BPE Solicitors agreed to the publication of a regulatory settlement agreement following the investigation.
A spokesperson from BPE Solicitors said: 'Between July 2007 and May 2012, BPE Solicitors acted in 65 conveyancing transactions where clients had specifically requested to utilise a SDLT mitigation scheme. These schemes were entirely legal, and as such, BPE was obliged to act on its clients’ instructions under the regulations by which it operates. Clients were advised to pursue such schemes following advice from tax specialists and chartered accountants unaffiliated with BPE.
'The SRA has deemed that during the course of these transactions, BPE failed to act in the best interests of lender clients (i.e. building societies or other mortgage lenders) in 38 of these cases by not notifying the lender that an SDLT scheme was being employed. This represented a conflict of interest, or a potential conflict of interest between private and lender clients, although there is no evidence that any parties suffered any disservice. There was no impact on the lenders involved, financial or otherwise, and BPE acted on specialist legal advice provided at the time.
'The SRA has accepted BPE’s admission of a breach of the principles in the Solicitors Code of Conduct 2007 and the SRA Principles 2011. As such, BPE has accepted a £2000 fine for its actions. BPE takes great care to act in the best interests of all of its clients at all times.'
HMRC has been approached for comment on the legality issue.