SDLT mitigation scheme gone wrong...
Discussion
Hope someone can offer some sound advice, I posted this in homes, gardens DIY originally but it'll et more traffic here I hope....
So I'll try to be concise:-
Completed on the current house in April 2010.
The conveyancing firm sold us a SDLT Tax Planning product that essentially means we paid them the full SDLT, they did something and credited us back approx 40% of the amount. Their fee to so this was 50% of the SDLT +VAT so circa £900. This was sold to us as being entirely legitimate and I was none the wiser, this was apparently not exactly within the spirit of the law.
Letter from HMRC early Dec 2013 telling us the conveyancing firm we used has ceased trading following action from the Solicitors Regulation Authority and they are now carrying out a review of the SDLT returns submitted by the firm on behalf of their clients.
Another Letter last week (May 2014) telling us that the solicitor has incorrectly completed the SDLT return and there is an outstanding payment due in the sum of £1550 + interest + penalties. We are liable for this according to HMRC.
I rang HMRC and explained the situation and they stated I was liable for the tax regardless of the situation. I explained I didn't have that amount of money to pay out in one hit so they explained I could pay off as much as I could afford and that this would work in my favour as it showed I was willing to comply and would put off any action to recover the money. At this point I was under the impression that any losses I incurred would be covered by the SRA compo scheme so I went ahead and paid off £300 of the SDLT balance.
Then I rang the firm appointed by the SRA to see what could be done. They tell me the only course of action available is to write to the HMRC explaining the situation in the hope they will write off the unpaid SDLT and we won't be liable. The basis for this being we acted in good faith and have proof of payment of the full SDLT in the completion statement. To do this for us there would be a £500 fixed fee (to check some emails and write 1 letter ffs) and there is no guarantee it would work. they said there was no mechanism in place to claim any compensation from the SRA? At this point I wish I'd not paid that £300 out!
Anyway....I've gone back through the emails from the conveyancer and it looks like they never implemented the scheme at all anyway! Their disbursements are listed and the SDLT figure is there plain as day, there is no mention of the tax planning fee or any record of us being credited back any amount as we expected. Essentially it looks like we have paid them the SDLT, they have filed a zero rated SDLT return and pocketed the cash.
As it stands I have drafted a letter to HMRC detailing the chain of events and included the letter we had selling us the scheme plus all the emails/invoices completion statement that shows what we paid. I have also put a note in requesting my £300 be refunded until they decide what to do. We are also looking to see if my Wife’s union membership might give us some free legal advice but not sure about that yet.
Anyway, congrats if you read all that. And yes, I should have known better but I was sold a product by a professional and you expect that they aren’t acting illegally! I’m not the only one that’s been done over by these cowboys either, lots of people in a similar situation apparently.
So I'll try to be concise:-
Completed on the current house in April 2010.
The conveyancing firm sold us a SDLT Tax Planning product that essentially means we paid them the full SDLT, they did something and credited us back approx 40% of the amount. Their fee to so this was 50% of the SDLT +VAT so circa £900. This was sold to us as being entirely legitimate and I was none the wiser, this was apparently not exactly within the spirit of the law.
Letter from HMRC early Dec 2013 telling us the conveyancing firm we used has ceased trading following action from the Solicitors Regulation Authority and they are now carrying out a review of the SDLT returns submitted by the firm on behalf of their clients.
Another Letter last week (May 2014) telling us that the solicitor has incorrectly completed the SDLT return and there is an outstanding payment due in the sum of £1550 + interest + penalties. We are liable for this according to HMRC.
I rang HMRC and explained the situation and they stated I was liable for the tax regardless of the situation. I explained I didn't have that amount of money to pay out in one hit so they explained I could pay off as much as I could afford and that this would work in my favour as it showed I was willing to comply and would put off any action to recover the money. At this point I was under the impression that any losses I incurred would be covered by the SRA compo scheme so I went ahead and paid off £300 of the SDLT balance.
Then I rang the firm appointed by the SRA to see what could be done. They tell me the only course of action available is to write to the HMRC explaining the situation in the hope they will write off the unpaid SDLT and we won't be liable. The basis for this being we acted in good faith and have proof of payment of the full SDLT in the completion statement. To do this for us there would be a £500 fixed fee (to check some emails and write 1 letter ffs) and there is no guarantee it would work. they said there was no mechanism in place to claim any compensation from the SRA? At this point I wish I'd not paid that £300 out!
Anyway....I've gone back through the emails from the conveyancer and it looks like they never implemented the scheme at all anyway! Their disbursements are listed and the SDLT figure is there plain as day, there is no mention of the tax planning fee or any record of us being credited back any amount as we expected. Essentially it looks like we have paid them the SDLT, they have filed a zero rated SDLT return and pocketed the cash.
As it stands I have drafted a letter to HMRC detailing the chain of events and included the letter we had selling us the scheme plus all the emails/invoices completion statement that shows what we paid. I have also put a note in requesting my £300 be refunded until they decide what to do. We are also looking to see if my Wife’s union membership might give us some free legal advice but not sure about that yet.
Anyway, congrats if you read all that. And yes, I should have known better but I was sold a product by a professional and you expect that they aren’t acting illegally! I’m not the only one that’s been done over by these cowboys either, lots of people in a similar situation apparently.
You really expect a refund and for them to not require the remainder?
Detailing the chain of events would essentially be that you entered a scheme fully expecting to evade, it was evaded but it's not fair as the solicitors didn't actually enter you into the scheme and pocketed the scheme fee.
Regardless of any action you might take against previous firm / their insurer for refund of the fee they didn't pass onto scheme, why on earth do you think you do not owe HMRC?
(Moot point but you refer to them filing a zero sdlt form - who signed that?)
Detailing the chain of events would essentially be that you entered a scheme fully expecting to evade, it was evaded but it's not fair as the solicitors didn't actually enter you into the scheme and pocketed the scheme fee.
Regardless of any action you might take against previous firm / their insurer for refund of the fee they didn't pass onto scheme, why on earth do you think you do not owe HMRC?
(Moot point but you refer to them filing a zero sdlt form - who signed that?)
IANAL....and when someone that is sells you a product you assume it's legitimate.
My completion statement shows that we paid the full SDLT amount and receieved nothing back.
Essentially we are being asked to pay it twice + interest + penalties. Yeah, that feels fair to me.
Expected response btw, ie. all my fault, I should burn in hell, not going well for the OP etc etc...
My completion statement shows that we paid the full SDLT amount and receieved nothing back.
Essentially we are being asked to pay it twice + interest + penalties. Yeah, that feels fair to me.
Expected response btw, ie. all my fault, I should burn in hell, not going well for the OP etc etc...
dave_s13 said:
IANAL....and when someone that is sells you a product you assume it's legitimate.
My completion statement shows that we paid the full SDLT amount and receieved nothing back.
Essentially we are being asked to pay it twice + interest + penalties. Yeah, that feels fair to me.
Expected response btw, ie. all my fault, I should burn in hell, not going well for the OP etc etc...
Behave darling.My completion statement shows that we paid the full SDLT amount and receieved nothing back.
Essentially we are being asked to pay it twice + interest + penalties. Yeah, that feels fair to me.
Expected response btw, ie. all my fault, I should burn in hell, not going well for the OP etc etc...
Who signed the return?
Why should HMRC care about a dispute between you and your solicitors?
pork911 said:
Behave darling.
Who signed the return?
Why should HMRC care about a dispute between you and your solicitors?
Not me. So I assume it was all handled by the conveyancing solicitors who have now been prosecuted and shut down.Who signed the return?
Why should HMRC care about a dispute between you and your solicitors?
http://www.sra.org.uk/consumers/solicitor-check/53...
I don't think they will care. They want their money.
It sounds more like a claim against the firm who pocketed the cash - or a claim to the SRA in any case.
http://www.sra.org.uk/consumers/problems/solicitor...
It sounds more like a claim against the firm who pocketed the cash - or a claim to the SRA in any case.
http://www.sra.org.uk/consumers/problems/solicitor...
dave_s13 said:
pork911 said:
Behave darling.
Who signed the return?
Why should HMRC care about a dispute between you and your solicitors?
Not me. So I assume it was all handled by the conveyancing solicitors who have now been prosecuted and shut down.Who signed the return?
Why should HMRC care about a dispute between you and your solicitors?
http://www.sra.org.uk/consumers/solicitor-check/53...
pork911 said:
dave_s13 said:
pork911 said:
Behave darling.
Who signed the return?
Why should HMRC care about a dispute between you and your solicitors?
Not me. So I assume it was all handled by the conveyancing solicitors who have now been prosecuted and shut down.Who signed the return?
Why should HMRC care about a dispute between you and your solicitors?
http://www.sra.org.uk/consumers/solicitor-check/53...
I think the point that pork is trying to make is this:
Consider I scam you into giving me £5000 to make it so you pay no income tax this year. Saving you money.
When this system is called tax evasion and/or you realise I've scammed you, you still have to pay your income tax regardless.
HMRC don't really mind that you've lined my pockets handsomely, you've still not paid your income tax, and you still owe the full amount.
SDLT is no different.
Consider I scam you into giving me £5000 to make it so you pay no income tax this year. Saving you money.
When this system is called tax evasion and/or you realise I've scammed you, you still have to pay your income tax regardless.
HMRC don't really mind that you've lined my pockets handsomely, you've still not paid your income tax, and you still owe the full amount.
SDLT is no different.
dave_s13 said:
Then I rang the firm appointed by the SRA to see what could be done. They tell me the only course of action available is to write to the HMRC explaining the situation in the hope they will write off the unpaid SDLT and we won't be liable. The basis for this being we acted in good faith and have proof of payment of the full SDLT in the completion statement. To do this for us there would be a £500 fixed fee (to check some emails and write 1 letter ffs) and there is no guarantee it would work. they said there was no mechanism in place to claim any compensation from the SRA? At this point I wish I'd not paid that £300 out!
Really? I would be asking the SRA why the firm that they appointed as intervening agent - http://www.sra.org.uk/consumers/solicitor-check/53... appears to be giving you duff information - - http://www.sra.org.uk/consumers/problems/solicitor...If you can provide the required evidence you can make the claim yourself. You don't need to pay the intervening agent a fee to do this (pretty sharp practice for them to try to squeeze yet more money from you - no wonder some people have a jaundiced view of the legal profession). The decision whether you are eligible for a claim from the discretionary Compensation Fund rests with the SRA.
None of the above changes the fact that HMRC want the money due to them. They are coming after you because the liability remains yours (see the second link below): the dodgy solicitor was just an intermediary paying over the SDLT on your behalf (hence 'disbursement'). The question is whether you will get compensation for what he effectively stole from you.
There is a massive difference between avoidance (legal) and evasion (not so) of tax. I am constantly amazed that people don't bother to do any research of their own when presented with something that appears to be too good to be true. The information is out there.
http://www.hmrc.gov.uk/avoidance/spotlights19.htm
http://www.bailii.org/uk/cases/UKFTT/TC/2013/TC026...
What isn't 100% clear is whether the solicitor was peddling one of these schemes or merely using it as a front with the intention from the start of simply trousering the full amount of the SDLT.
Red Devil said:
dave_s13 said:
Then I rang the firm appointed by the SRA to see what could be done. They tell me the only course of action available is to write to the HMRC explaining the situation in the hope they will write off the unpaid SDLT and we won't be liable. The basis for this being we acted in good faith and have proof of payment of the full SDLT in the completion statement. To do this for us there would be a £500 fixed fee (to check some emails and write 1 letter ffs) and there is no guarantee it would work. they said there was no mechanism in place to claim any compensation from the SRA? At this point I wish I'd not paid that £300 out!
Really? I would be asking the SRA why the firm that they appointed as intervening agent - http://www.sra.org.uk/consumers/solicitor-check/53... appears to be giving you duff information - - http://www.sra.org.uk/consumers/problems/solicitor...If you can provide the required evidence you can make the claim yourself. You don't need to pay the intervening agent a fee to do this (pretty sharp practice for them to try to squeeze yet more money from you - no wonder some people have a jaundiced view of the legal profession). The decision whether you are eligible for a claim from the discretionary Compensation Fund rests with the SRA.
None of the above changes the fact that HMRC want the money due to them. They are coming after you because the liability remains yours (see the second link below): the dodgy solicitor was just an intermediary paying over the SDLT on your behalf (hence 'disbursement'). The question is whether you will get compensation for what he effectively stole from you.
There is a massive difference between avoidance (legal) and evasion (not so) of tax. I am constantly amazed that people don't bother to do any research of their own when presented with something that appears to be too good to be true. The information is out there.
http://www.hmrc.gov.uk/avoidance/spotlights19.htm
http://www.bailii.org/uk/cases/UKFTT/TC/2013/TC026...
What isn't 100% clear is whether the solicitor was peddling one of these schemes or merely using it as a front with the intention from the start of simply trousering the full amount of the SDLT.
For clarity the scheme was sold as a legitimate product to mitigate SDLT not "avoid" it. I am now aware that this is decidely outside of the spirit of the law. I wasn't then (4 years ago).
I had an initial chat with the firm appointed by the SRA yesterday. She was quite clear that I no recourse to claim from the SRA compo scheme. Their intention would be to write to the HMRC and effetively ask them to waive any durty owed. Given this is hugely unlikely I was very reluctant to spend £500 letting them have a go.
My plan is to:-
1. Wait and see if we can get some free legal advice through my wifes union. If we can't then...
2. Write back to HMRC explaining how we have arrived at this situation and seek their firm position on what is owed by who in light of what has and hasn't already been paid out.
3. Claim myself through the SRA for my losses - I have a claim for ready to fill in.
Ultimately, I feel I acted in good faith on the advice of a legal professional and now I'm being shafted.
JustinP1 said:
I think the point that pork is trying to make is this:
Consider I scam you into giving me £5000 to make it so you pay no income tax this year. Saving you money.
When this system is called tax evasion and/or you realise I've scammed you, you still have to pay your income tax regardless.
HMRC don't really mind that you've lined my pockets handsomely, you've still not paid your income tax, and you still owe the full amount.
SDLT is no different.
Yes, I apreciate the mechanics of your scenario and I appreciate that you have expressed it a little less like "a bit if a Consider I scam you into giving me £5000 to make it so you pay no income tax this year. Saving you money.
When this system is called tax evasion and/or you realise I've scammed you, you still have to pay your income tax regardless.
HMRC don't really mind that you've lined my pockets handsomely, you've still not paid your income tax, and you still owe the full amount.
SDLT is no different.
" 
Everybody is aware of tax planning and if a scheme is sold to you in good faith can you realy be such a bad person to go along with it. I bet jimmy Carr didn't get any abuse when he posted on here.
Also I think income tax vs SDLT isn't a fair comparison. I've only ever had one dealing with SDLT so it's not something I really know anything about other than the basics. Income tax - I pay that every month so it's more familiar.
Your dispute is with the SRA, not HMRC.
They haven't been paid, they're not likely to say "oh well you gave the money you should've given to us to A.N.Other party, we'll let you off". HMRC aren't responsible for regulating solicitors.
I think you're on a hiding to nothing trying to get HMRC to waive the bill. They shut companies down like it's nothing and you think they'll be considerate of a tax evasion (note: not avoidance) scheme gone wrong?
edit: Sorry that sounds a bit arsey but honestly you've got no claim against HMRC, save goodwill. HMRC aren't known for their goodwill.
They haven't been paid, they're not likely to say "oh well you gave the money you should've given to us to A.N.Other party, we'll let you off". HMRC aren't responsible for regulating solicitors.
I think you're on a hiding to nothing trying to get HMRC to waive the bill. They shut companies down like it's nothing and you think they'll be considerate of a tax evasion (note: not avoidance) scheme gone wrong?
edit: Sorry that sounds a bit arsey but honestly you've got no claim against HMRC, save goodwill. HMRC aren't known for their goodwill.
Edited by Durzel on Wednesday 7th May 12:59
dave_s13 said:
Thank you. Now that is helpful.
dave_s13 said:
For clarity the scheme was sold as a legitimate product to mitigate SDLT not "avoid" it. I am now aware that this is decidely outside of the spirit of the law. I wasn't then (4 years ago).
Aren't they all. 
The transaction which gave rise to the Tribunal appeal took place over 6 years ago! The ruling was only handed down last year. HMRC have been putting avoidance schemes under the microscope for quite some time and taking an aggressive approach to closing them off. They are not merely outside the spirit, but also the letter, of the law.For a lot of those involved in the industry it's a game. Find a loophole and exploit it until HMRC react. Then the average Joe who is trusting and not up to speed is hung out to dry. Only mega bucks corporations (and Bernie Ecclestone!) have the means to take on HMRC and end up with a favourable deal.
dave_s13 said:
I had an initial chat with the firm appointed by the SRA yesterday. She was quite clear that I no recourse to claim from the SRA compo scheme.
That's only her opinion; doesn't make it correct. I would still be pursuing it with the SRA. Her firm isn't liable for the unpaid tax, so why is she so keen to deter you from making a compensation claim on the SRA fund? . A cynic might suggest she is steering you towards her preferred solution. One might even say touting for business... 
dave_s13 said:
Their intention would be to write to the HMRC and effetively ask them to waive any durty owed. Given this is hugely unlikely I was very reluctant to spend £500 letting them have a go.
What's it got to do with her firm? The case I linked to makes it crystal clear that the SDLT liability remains with the purchaser. What makes her think that paying her firm £500 of your money to write a letter that you could do yourself will persuade HMRC to relent? Does it have a track record of success in that field? Put up or shut up.dave_s13 said:
My plan is to:-
1. Wait and see if we can get some free legal advice through my wifes union. If we can't then...
2. Write back to HMRC explaining how we have arrived at this situation and seek their firm position on what is owed by who in light of what has and hasn't already been paid out.
3. Claim myself through the SRA for my losses - I have a claim for ready to fill in.
1. Nothing to lose by doing that.1. Wait and see if we can get some free legal advice through my wifes union. If we can't then...
2. Write back to HMRC explaining how we have arrived at this situation and seek their firm position on what is owed by who in light of what has and hasn't already been paid out.
3. Claim myself through the SRA for my losses - I have a claim for ready to fill in.
2. Their position will be firm: you can be sure of that - send us the money Dave! The Tribunal ruling is on their side. Neither the SRA nor the intervening firm has any liability to settle up with HMRC. Unfortunately the dodgy solicitor was acting for you, so you're on the hook.
3. Again, nothing to lose. It's binary. You'll get one of two answers.
dave_s13 said:
Ultimately, I feel I acted in good faith on the advice of a legal professional and now I'm being shafted.
Your situation sucks and I feel your pain. You're not the first to be taken for a ride by a smooth talking 'professional' though and you won't be the last. We put our trust in such people (accountants; financial advisors; medical practitioners; solicitors) but there are rogues in those occupations just as in any other. Yes, you've been duped. Unfortunately, sometimes life just ain't fair. Edited by Red Devil on Wednesday 7th May 13:13
Explaining things will make no positive difference for you, and may well make things worse.
You should give careful consideration to this as they don't care what your arrangements with the solicitors were (other than perhaps fining you, as the responsibility for it is down to you) and as already said your dispute (if any) is with your solicitors / their insurers.
You would likely be best just saying it appears solicitors didn't pay the right amount, how much was paid, how much is owed and plead poverty and ask for as long as possible to pay.
Alternatively you can disclose everything and try and spin it how you want, they will decide whether you are blameless or not, but that will not reduce what is owed (and could increase it).
You should give careful consideration to this as they don't care what your arrangements with the solicitors were (other than perhaps fining you, as the responsibility for it is down to you) and as already said your dispute (if any) is with your solicitors / their insurers.
You would likely be best just saying it appears solicitors didn't pay the right amount, how much was paid, how much is owed and plead poverty and ask for as long as possible to pay.
Alternatively you can disclose everything and try and spin it how you want, they will decide whether you are blameless or not, but that will not reduce what is owed (and could increase it).
The fact that the dodgy solicitor has been closed down strongly suggests that he was recommending a SDLT scheme which he knew was, to say the least, iffy. Or else it was just a smoke screen for outright theft (especially if the OP paid over the full amount of SDLT and the solicitor never disbursed a penny of it).
What would be interesting to know is what figure was entered on the SDLT1 form and the corresponding figure at the Land Registry. Or indeed if any SDLT1 form was submitted at all.
The OP is going to have to settle the account with HMRC and hope he can get compensation from the SRA on the basis of malpractice by the solicitor. I reckon he has a reasonable chance.
What would be interesting to know is what figure was entered on the SDLT1 form and the corresponding figure at the Land Registry. Or indeed if any SDLT1 form was submitted at all.
The OP is going to have to settle the account with HMRC and hope he can get compensation from the SRA on the basis of malpractice by the solicitor. I reckon he has a reasonable chance.
Red Devil said:
The fact that the dodgy solicitor has been closed down strongly suggests that he was recommending a SDLT scheme which he knew was, to say the least, iffy. Or else it was just a smoke screen for outright theft (especially if the OP paid over the full amount of SDLT and the solicitor never disbursed a penny of it).
What would be interesting to know is what figure was entered on the SDLT1 form and the corresponding figure at the Land Registry. Or indeed if any SDLT1 form was submitted at all.
The OP is going to have to settle the account with HMRC and hope he can get compensation from the SRA on the basis of malpractice by the solicitor. I reckon he has a reasonable chance.
The HMRC letter states a £0 value SDLT form was submitted to them but the land reg fig did not correspond...I don't have the letter to hand so don't have the exact wording. I'll post back later this evening...better get some work done.What would be interesting to know is what figure was entered on the SDLT1 form and the corresponding figure at the Land Registry. Or indeed if any SDLT1 form was submitted at all.
The OP is going to have to settle the account with HMRC and hope he can get compensation from the SRA on the basis of malpractice by the solicitor. I reckon he has a reasonable chance.
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