A well-known Gloucestershire law firm has accepted that it did not act in the best interests of lender clients due to its involvement in stamp duty land tax (SDLT) avoidance schemes.
The regulatory settlement agreement published yesterday in relation to Cheltenham firm BPE Solicitors is the latest in a string of disciplinary cases concerning such schemes.
The agreement means there will be no proceedings before the Solicitors Disciplinary Tribunal.
It said BPE acted in 65 conveyancing transactions between 2007 and 2012 which resulted in the initial non-payment of at least £1.3m to HM Revenue & Customs. In addition to its conveyancing charges – which totalled £102,000 for the 65 transactions – the firm billed £28,000 (excluding VAT) for facilitating the schemes.
In 49 of the cases, the firm was also instructed to act for the mortgage provider, but only disclosed the SDLT schemes to the lender in 11 of them.
In extensive mitigation, BPE said most of the clients were introduced by “the specialist tax partner of a highly reputable regional firm of chartered accountants who advised the firm (and other law firms) on regulatory matters including the annual SRA accountant’s report and continue to do so. This firm of chartered accountants also provided tax advice to the firm’s lay clients on the schemes”. For the rest, the clients also received tax advice from accountants.
It continued: “The firm also undertook its own enquiries by way of due diligence to ascertain the legitimacy of the schemes, including advice from the chartered accountants and advice from tax counsel.”
The firm pointed out that the lender clients involved obtained a fully valid and enforceable legal charge, and that the time no lender “expressed a need to the firm for additional reporting in respect of the widely publicised SDLT schemes”.
In relation to the schemes not disclosed to lenders, “experienced conveyancing partners in the firm decided at the time that [they] were not material to report to lenders as the outcomes were exactly as the lender client would have expected”.
BPE said following the warning notice on such schemes issued by the SRA in February 2012, it stopped undertaking any conveyancing transactions involving their use.
The £28,000 in fees amounted to 1.9% of BPE’s domestic conveyancing revenue between 2007 and 2012, revenue which in turn accounted for just 7% of the firm’s overall income.
“The additional income earned by the firm from individual clients amounted to only 0.06% of the total revenue of the firm between 2007 and 2012 and no introductory commission or other similar payment was paid to or received from any third party in connection with the facilitation of these SDLT schemes.”
BPE admitted that it failed to disclose material information to the lender clients, “and in so doing failed to act in the lender clients’ best interests and failed to provide a good/proper standard of service”, and that it acted in transactions where there was a conflict or a significant risk of a conflict.
The firm was fined £2,000 and agreed to pay costs of £7,500.