120,000 people could be owed stamp duty refunds

More than 120,000 people may be owed compensation of up to £80,000 each, after Cornerstone Tax uncovered an industry-wide error in relation to property transfers into pension schemes.

The error – whereby solicitors acting in such transfers assume that Stamp Duty Land Tax (SDLT) must be paid on the transfer of property from multiple owners into self-invested personal pensions (SIPPs) and small self-administered pension schemes (SSASs) – has been confirmed with HMRC by Cornerstone.

The tax specialist said it had already won several test case refunds for its clients and has received pre transaction “legal” clearance from HMRC.

Given the nature of the misunderstanding across the industry, Cornerstone calculated that the compensation due from HRMC and solicitors to pension holders affected could amount to almost £10bn.

“We have spent the last year or so working on researching this issue,” Cornerstone principal consultant, David Hannah, commented. “The scale of it and the industry reluctance to even acknowledge that there is a problem has been staggering.

“We have contacted over 50 of the top pension providers, accountants and IFAs in the country and thus far have not received a single correct response, highlighting the prevalence of ignorance to this issue in the industry. 
 
“Given the fact that we have a pre transaction clearance and refunds from HMRC on two cases it leads me to believe that tax advisors, accountants, and solicitors simply aren't doing what needs to be done when presented with this particular question and scenario.”
 
The error means that not only have clients lost capital from their pensions in the initial SDLT payment, but also lost the potential to invest that capital – thereby losing any potential growth in the ensuing years.

Cornerstone revealed it had therefore calculated the average error for the value of the claim as 150% of the tax paid incorrectly, assuming 7% ROI.

Kingswood Group managing director, Leigh Philpot, said: “We were surprised when recently advised by Cornerstone that the payment of stamp duty by pensions in these circumstances was not taxable. We believe many of our clients will have been impacted by earlier erroneous tax advice.

“Our advisers are therefore reviewing the circumstances for these clients and working with Cornerstone to seek redress.  We also expect enquiries to our Kingswood offices across the UK from non-clients seeking assistance in navigating through this situation.”

Forbes Dawson tax partner, Andrew Marr, also stated he was “surprised” that the issue does not seem to be on the radar of pension advisors.

“The situation of transfers to and from partnerships and connected parties is well known to tax advisors across the UK and is covered by HMRC in their manuals,” he added.

“Broadly, if a partnership makes a transfer to a connected party then no SDLT should be due. If a partnership makes a transfer to a connected pension scheme then it should follow that no SDLT is due and I would expect HMRC to agree with this.”

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