Thousands Potentially Owed Stamp Duty Refunds Worth Billions Across Scotland

19th August 2020

Stamp duty overpayment could mean up to £10bn in compensation nationally for pension holders.

Leading Stamp Duty Advisors - SDLT Refunds and Cornerstone Tax - discuss the issue and industry's reluctance to change their advice.

An industry-wide error in relation to property transfers into SIPPs and SSASs has been uncovered by Cornerstone Tax, which means that over 120,000 people may be owed compensation of up to £80,000 each.

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 SIPPs or SSASs - has been confirmed with HMRC by Cornerstone Tax, who have already won several test case refunds for their clients and have received pre-transaction "legal" clearance from HMRC. Given the comprehensive nature of this misunderstanding across the industry, Cornerstone calculates that the compensation due from HRMC and solicitors to pension holders affected could amount to nearly £10 billion in total.

Cornerstone first identified the problem in early 2019 and approached several members of the pensions industry with their concerns. Advance clearance was also sought from HMRC and was obtained; this confirmed pensions that acquired trade properties from joint owners or owner-managed companies since 2007, which have paid SDLT on these contributions in specie or sales to pension schemes, should not have paid SDLT.

The error means that not only did clients lose 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. For the average error the value of the claim is therefore calculated at 150% of the tax paid incorrectly (assuming 7% ROI).

David Hannah - principal consultant at Cornerstone Tax - said: "We have spent the last year or so working on researching this issue. 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 2 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. They are in fact operating on a series of assumptions and almost "reflexes" which cause them to see the words cash/selling in the question and because it would be common sense to assume that tax is due, they are simply reaching for the obvious answer."

Leigh Philpot of Kingswood Group 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."

SDLT Refunds (part of Cornerstone Tax) administer all investigation into compensation and work on a no-win-no-fee basis. SDLT Refunds are also offering a free helpline to anyone wondering whether they may have a claim. You can find more information on their website here: https://sdltrefunds.ctatax.uk.com/pensions/

Andrew Marr, a Tax Partner at Forbes Dawson Tax Specialists, said: "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. 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.

I am surprised to hear that this issue does not seem to be on the radar of pension advisors"